|Most Volatile Share||Rate of Change (ROC)||Beta Stocks||Chaikin Money Flow (CMF)|
|Average Directional Index (ADX)||Accumulation Distribution Index (ADI)||On Balance Volume (OBV)||Bollinger Band|
|MACD||Volume||Pivot Point||Moving Average basics|
Throughout our site in both tutorial and screener, if we have given maximum emphasis on a parameter after price then it is volume. Other indicators give leads but it is volume which gives stamp of approval to signal. Because of this reason various volume based indicators emerged and some of the prominent ones are Money Flow Index (MFI), On Balance Volume (OBV), Accumulation Distribution Index (ADI) and Chaikin Money Flow(CMF) .
Chaikin Money Flow or CMF was developed by Mark Chaikin. His other significant contribution to technical analysis was Accumulation Distribution Line (ADL).
Greater details of price volume correlation include Volume precedes price, rising Volume in uptrend and price volume divergence is explained here. We recommend to read it together with CMF to have deeper understanding as some of the terms used in current article, is well explained there.
CMF is an indicator that tries to measure buying pressure versus selling pressure. Unlike OBV, it is much simpler to interpret as its value oscillates in positive or negative territory. Positive value signals Money flowing in or accumulation while negative value means money moving out of the stock. Value of CMF is calculated based on last trading session typically 20 or 21, because of this it reflect most recent change in stock movement.
Chaikin Money Flow (CMF) is normally represented as a small chart below price chart as:
CMF Calculation: For Simplicity CMF Calculation is split into three steps
a. Calculation For Money Flow Multiplier:
Money Flow Multiplier=[(Close-Low)-(High-Close)]/(High-Low)
b. Calculation For Money Flow Volume:
Money Flow Volume=Money Flow Multiplier(x)Volume for the Period
c. Calculation For CMF:
CMF 21 = Sum of Money Flow Volume for last 21 days / Sum of Volume of last 21 trading days
Though TopStockResearch uses 21 days period, Usage of 20 days period is also common among tech Analyst.
|CMF Value||Occurrence||Interpretation||Possible reasons /outcome|
|0.4 to 1.0||Rare||Very Strong Buying Pressure||
|0.05 to 0.40||occasional||Strong buying Pressure||
|0 to 0.05||Common||Some buying pressure||
|Cross over from negative to Positive||Regular||Bullish signal||
|Cross over from Positive to negative||Regular||Bearish signal||
|0 to - 0.05||Common||Some Selling pressure||
|-0.05 to -0.40||Occasional||Strong Selling Pressure||
|-0.4 to -1.0||Rare||Very Strong Selling Pressure||
1. It is important to highlight that just relying on CMF movement from negative territory to positive territory is itself not a complete signal. In choppy market you may get many such false signals.
2. Rather than absolute value, duration of +ve territory tells better about accumulation.
3. Momentum of CMF tells more than simply higher value.
|Ranging Market||Rising CMF||Positive Breakout||Bullish Signal|
|Falling CMF||Negative Breakout||Bearish Signal|
|Up Trending Market||Rising CMF||Up Trend Confirmation||Bullish Signal|
|Falling CMF||Divergence, Reversal||Warning to Bulls|
|Down Trend||Falling CMF||Down Trend Confirmation||Bearish Signal|
|Rising CMF||Divergence||Warning to Bears|