Chaikin Money Flow (CMF) indicator

 Chaikin Money Flow (CMF) indicator is a technical analysis tool that measures the accumulation and distribution of money flow over a specified period, typically 21 days. Developed by Marc Chaikin, the CMF helps traders assess the buying and selling pressure in a market. It ranges between -1 and +1, where positive values indicate buying pressure and negative values indicate selling pressure.

Calculation of Chaikin Money Flow (CMF): 


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Example Calculation:

  1. Calculate the Money Flow Multiplier for each period.
  2. Calculate the Money Flow Volume for each period.
  3. Sum the Money Flow Volume over the specified period (e.g., 21 days).
  4. Sum the Volume over the same period.
  5. Divide the sum of the Money Flow Volume by the sum of the Volume to get the CMF

Interpretation and Usage:

  • Positive CMF Values:

    • Indicate buying pressure (accumulation) when the closing prices are generally near the highs of the trading range and volume is high.

  • Negative CMF Values:

    • Indicate selling pressure (distribution) when the closing prices are generally near the lows of the trading range and volume is high.

  • Zero Line Crosses:

    • A cross above zero suggests potential buying opportunities.
    • A cross below zero suggests potential selling opportunities.