Introduction

The Chaikin Money Flow (CMF) indicator was developed by Marc Chaikin to create an oscillating indicator for his earlier, cumulative indicator Accumulation/Distribution. Both indicators measure the degree to which money is flowing into or out of a security or currency. Chaikin created these indicators to expand and improve on an earlier volume indicator, On Balance Volume.

On Balance Volume (OBV) compares a currency pair's closing price with its previous day's close and either adds or subtracts the volume to a cumulative total, if the pair is up or down respectively. Accumulation/Distribution (A/D) altered the parameters of OBV by using the mean price, the midpoint between the periods high and low, to decide whether volume for that period was being accumulated (bought) or distributed (sold). After categorizing the period either as accumulation or distribution A/D then adds or subtracts volume based on the degree to which the pair closed above or below its open. The main difference between Chaikin’s two volume indicators is that Accumulation/Distribution is a cumulative running total while Chaikin Money Flow oscillates around a zero line.

ShareThis

The materials presented on this website are solely for informational purposes and are not intended as investment or trading advice. Please refer to our risk disclosure page for more information.