Indicator - Chaikin's Money Flow
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Definition Chaikin's Money Flow
Money flow multiplier = [(Close - Low) - (High - Close)] /(High - Low)
Money flow volume = Money Flow Multiplier x Volume of the period
CMF of n periods value = Sum of money flow volume over n periods / Sum of volume over n-1 periods
Interpretation Chaikin's Money Flow
CMF oscillates between +1 and -1.
When the money flow stays significantly above 0, it indicates buying pressure and vice versa. The divergence between the indicator and the price identifies reversal points and gives bullish/bearish signal.
A bullish divergence occurs when the stock price makes new lows while the indicator fails to make new lows.
A bearish divergence occurs when the stock price makes new highs while the indicator fails to make new highs
