FAO MAX DAMAGE

[Dr Iraj]

Hi Max,

Chaiken’s Money flow used in AIQ is barley related to TRUE money flow. A true money flow indicator multiplies the number of the shares by the price in each trade. It then gives the volume CREDIT to either Positive or negative money flow.At the end of the day you figure out which was bigger positive or negative money flow, and that is your number for whether money flowed into or out of your stock that day. As simple as that.

Chaiken’s Money flow uses number from closing. That does not give you the accuracy needed. (Money flow should indicate whether people are interested in a stock that moving up) It is actually possible that a stock could actually close lower than the previous day and money still flowed into the stock. Chaiken money flow has a deceiving name.
It might be better if we call it Chaiken's volume price evaluator than money flow as it is rather misleading.

Nice observation mate.

Does your software have Birinyi money flow? (MFI)
Let me know if you need to know more in detail.

 

[Max Damage]

Thanks for clearing that up for me

 

[CHARTY]

Does anyone uses Byrini's money flow? I never found it particularly attractive, as opposed to the on-balance volume. I would welcome comments on this money flow indicator.

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The above does not represent financial advice.

 

[Dr Iraj]

Birinyi’s MFI is one of the most robust tools in Tradestation. There is more litrature on Money flow analysis in Goldstein Steven B and Micheal N. Kahan (1998) technical analysis of stocks and commodities Volume 6 Feb. If you decide to use Chaiken’s Money flow osc as a base for you analysis you should really understand its limitation and what Chaiken is trying to demonstrate. On top of that I personally have found very few charts that display a divergence and reasonable buy signal. There is also a back tested research from Opening bell AIQ’s report that those who based their analysis on chaiken’s money flow for the last past 4 years they all failed to outperform the market. (I have no access to give you the exact reference till tomorrow. Those who wish to confirm my statement can go to the site. The report is there). Birinyi’s true measure of MONEY FLOW in and out of the stocks can also be found in commercial heavy duty softwares such as Deep insight, Total solution, Neuroshell .
I personally have modeled Birinyi’s Money flow indicator as a part of the input into my neural network as it is much simpler and straight forward representation of cash movement in and out of stocks.