Investment Education | Chaikin Money Flow

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Chaikin Money Flow

Chaikin Money Flow is a volume indicator that measures the momentum of buying and selling pressure in the market based on Accumulation/Distribution Line data.

The Accumulation/Distribution Line measures the positive and negative momentum in a security's price by comparing its current closing price to its high and low prices over a given time period. Some analysts believe that a close within the upper half of the indicator's range denotes buying pressure for the security, while a close within the bottom half of the range implies selling pressure.

Unlike most indicators, Chaikin Money Flow doesn't change based on day-to-day price fluctuations. Instead, it compares a security's current closing price to its closing prices over past periods of time. Chaikin Money Flow takes a certain number of time periods of Accumulation/Distribution Line data and divides by the total trading volume for the same period to arrive at a value. The more positive or negative the Chaikin Money Flow is, the more it is thought to correlate to stronger bullish or bearish outlooks, respectively.

Calculation

The calculation determines where the stock closed today, in relation to its range for the day (high price - low price). That value is then multiplied by today's volume:

Sample Chart View Graphic

The strategies described in this article are for information purposes only, and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. Securities are subject to market fluctuation and may lose value.

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