Chaikin Money Flow (CMF) is one of useful technical indicator used in forex technical analysis by many traders. Chaikin Money Flow is an indicator that calculates an indexed value based on price and volume for the number of bars specified in the input Length.

Calculations are made for each bar with an average price greater than the previous bar and for each bar with an average price less than the previous bar. These values are then indexed to calculate and plot the money flow.

The use of both price and volume provides a different perspective from price or volume alone. The money flow indicator tends to show dramatic oscillations and can be useful in identifying overbought and oversold conditions.

If Chaikin Money Flow is less than zero it’s a definite first bearish signal. If the point is below zero it means that a security is experiencing distribution or stays under selling pressure.

The Chaikin Money Flow is based on the supposition that a bullish stock has increasing volume and a rather high close price within its daily range which means strong security. Still there is a weak security if it’s permanently closed with a rather low close price within its high volume and daily range.

Related Articles

From Investopedia
Money flow is an indicator that calculates an indexed value based on price and volume for the number of bars specified in the input Length. (full article)

From Traderslog
Developed by Marc Chaikin, the Chaikin Money Flow is an oscillator derived from daily readings of the Accumulation Distribution Line. It indicates if a stock is undergoing accumulation or distribution. (full article)

From Forexrealm
The Chaikin Money Flow compares sum volume to the closing price and the daily peaks and falls to define the number of issues being purchased and sold of a certain security. (full article)