Chaikin Money Flow (CMF)

Name Type Prerequisite Use Cases
Chaikin Money Flow (CMF) Volume Price & Volume Gauging institutional accumulation or distribution.

Definition

Chaikin Money Flow (CMF) measures the amount of Money Flow Volume over a specific period. CMF sums Money Flow Volume over a specific look-back period, typically 20 or 21 days.

Mathematical Equation

\[ \text{MF Multiplier} = \frac{(\text{Close} - \text{Low}) - (\text{High} - \text{Close})}{\text{High} - \text{Low}} \]
\[ \text{MF Volume} = \text{MF Multiplier} \times \text{Volume} \]
\[ \text{CMF} = \frac{\sum \text{MF Volume}}{\sum \text{Volume}} \]

Special cases

  • Maximum possible value: 1
  • Minimum possible value: -1
  • Behavior: Oscillates between -1 and +1 to show buying vs. selling pressure using volume.

Visualization

CMF

Trading Significance

  1. Buying/Selling Pressure: CMF > 0 indicates buying pressure. CMF < 0 indicates selling pressure.

  2. Confirmation: Rising prices with rising CMF confirms uptrend.