Introduction
Designed by Marc Chaikin, Chaikin Oscillator Cash flow is calculated on the basis of daily values Lines accumulation / distribution. The basic idea of lines of accumulation / distribution is that the degree of pressure the buyers or sellers may be the location of the closure on the maximum and minimum for the relevant period (the location of the closing of Value). There is pressure of buyers when the market rose a tool in the upper half trading range for a certain period, and the pressure of sellers is when market instruments rose in the bottom half of trading range over the period. The significance of the location of the closure, multiplied by the volume form Value accumulation / distribution for each period. (For details, see Line of accumulation / distribution).
Methodology
CIEN schedule details the distribution of daytime Values accumulation / distribution and how they relate to the Chaikin Money Flow. Formula for cash flow Chaikin is the accumulated total sum of the accumulation / distribution for the 21 period, divided by the total amount of the accumulated amount for 21 years.
The graph CIEN purple frame allocates values of accumulation / distribution for 21 days. The total of these 21 days divided by the total amount for these 21 days form the value of cash flow Chaikin at the end of 21-day (purple arrow). To calculate the value of the next day, the significance of the accumulation / distribution of the first day of output, and the value of the next day is entered into the formula.
The number of periods can be changed to better meet the specific market-based instruments and a temporary format. 21-day Cash flow Chaikin good displays pressure buyers or sellers in the last month (for a daily schedule). Month period is sufficient to filter out random noise. When using a longer period, the indicator will varies less and less inclined to make quick turns. For weekly and monthly charts are usually more appropriate is a short period.
In general, the Chaikin money flow is considered to be bovine, when he and a positive disservice when it is negative. The next issue to consider is the time period during which the Chaikin money flow is positive or negative. Although the divergence can also be part of a strategy based on cash flow Chaikin, the absolute level and the overall direction of the oscillator is important.
The signs of the accumulation
Oscillator Chaikin Money flow gives bychi signals, indicating that market-based instruments is under accumulation. There are three signs that determine whether a market-based instruments in the stage of accumulation, and what strength of this accumulation.
1. The first and most obvious sign is if the Chaikin money flow above zero? When the indicator is positive, it shows the pressure on buyers and accumulation.
2. The second sign: Determine how long the oscillator has been able to stay above zero. The longer the oscillator remains above zero, the greater the confidence that market-based tool is being sustained accumulation. Prolonged periods.
The graph AA Chaikin Money flow actually increased, while the action continued to decline. Most of the October campaign traded sideways trend, while the Chaikin Money flow remained positive and continued to grow. The levels of accumulation, as shown by Chaikin money flow was very strong in October. Offer dropped in late October, and cash flows Chaikin declined in November. When the share falls, the levels of distribution has never dropped below -. 10, indicating that the pressure of sales was not so intense. In late November, was restored and the action broke resistance at 64. Chaikin Money flow has formed a higher minimum, and returned to positive territory, confirming the breakthrough. Pressure sellers quickly depleted and Chaikin Money flow rather sharply back. This was clear evidence of bovine mood in the market, but traders need to act quickly enough.
AOL graph is slightly different. Action has formed a double bottom in August and September, while the Chaikin money flow has formed a rather large positive divergence. This divergence was not a signal, but has warned that the pressure of vendors has decreased. Divergence can be complex to use and should be used in combination with other aspects of technical analysis. At a time when the action broke resistance at 52, Cash flow proprodavtsov Chaikin, or possibly being distributed. As with bychimi signals, there are three signs that are used to determine, whether the market is experiencing pressure tool vendors, and how this pressure.
1. The first and most obvious bearish signal is the value of cash flow Chaikin below zero. A negative value indicates that the market is under pressure from the tool vendors or at the stage of distribution.
2. The second potential bearish signal associated with the interval of time when Chaikin Money flow remained negative. The longer the oscillator remains negative, the higher the evidence sustained the pressure of sellers or distribution. Extended period of below zero indicates that the ratio of market-based instruments Medvezhye and probably will be the consequent pressure on prices. Time may be determined by measuring the percent of time when the indicator is below zero. If the Chaikin money flow is negative for 3 of 4 weeks, he feels the pressure of vendors in 75% of the time.
3. A third potential bearish signal is related to the degree of pressure or the distribution vendor. This can be defined by an absolute level of the oscillator. The values from both sides of the zero line within the 10 per cent (+ / - .10) are usually not considered strong enough,
to provide a bullish or bearish signal. Once the indicator moves below -. 10 degree pressure of sellers begins to cast bearish signal. (Movement above + .10 is significant enough to provide a bullish signal). Any further movement would increase the degree of pressure and sellers disservice strain. Marc Chaikin considers values below -25% (-. 25) as an indicator of strong pressure sellers. On the contrary, values higher than + .25 are considered as an indicator of the strong pressure of the buyers. These levels are a common approach and a critical level will depend on the characteristics of specific market-based instruments and past values of cash flow Chaikin.
J. C. Penny (JCP) is an example of the action, which is experienced in the distribution for many weeks before the price actually fell. As soon as the price start to fall, the indicator remained in negative territory for an extended period of time. From March to May.
Chaikin money flow was positive (green). May 18 event was opened with GEPom up, but the indicator plummeted to negative territory (red arrows). The action has improved during the day on 18 th May, but fell towards the end of the day and closed near the minimum. Regarding the previous closing share climbed. However, the action is closed with a minimum number of days with a large amount that is regarded as the pressure of vendors that showed Cash flow Chaikin.
To prove that such a drastic change in the indicator was not an accident, the indicator has fallen further in the next few weeks and remained negative for almost 3 months, indicating that pressure has been strong sellers for the shares. Not only is the pressure of sellers remained for a long period of time, but also the degree of pressure increase. Chaikin Money flow has reached a minimum at -. 468 (minus 46.8%), while the action was near his peak of about 50. Action to confirm the start of the pressure and sellers start their way down in June and July.
It was several weeks in August, when the indicator moved to positive territory. This may be looked on bychi, but it lasted less than 3 weeks, and cash flows Chaikin, only managed to reach the level of + .1270. In addition, the price movement of equities did not confirm this effect, and probably other pricing and dynamic-nomic indicators were also disservice. Positive values are not lasted long, and by early September Cash flow Chaikin traded below -. 25, a share trading in the region of 36. It was a good sign that the pressure vendors to stock remained high, and probably will soon be followed by pressure on the price. The action subsequently dropped below 20, and Cash flow Chaikin was never good with the end of August.
All three vendors were signs of pressure in the JCP:
1. Cash flow Chaikin moved to the negative territory before the share has declined.
2. The indicator remained negative for 6 out of 7 months (85% of the time).
3. Almost all negative values were less than -. 10, and a lot of time the indicator fell below -. 25.
IBM is a perfect example of corrective rally, throughout which the controversy arose. When the campaign reached a peak in July, Chaikin Money flow was far from their highs. The indicator was still slightly positive, and bovine, but not to exceed + .10, at least in part, affirming the maximum. Indicator has formed a double top in July with two peaks that are significantly lower than + .10. After declining in late July, the action is beginning to find support and rose in August, but the Chaikin money flow does not reflect this. Indicator twice failed below -. 10 and remained negative for almost a month. When the campaign reached its maximum recovery in September, Chaikin Money flow still remained negative.
Following the September peak action and the indicator started to fall. September 17, share has fallen in the high-volume, and Chaikin Money flow has shown a new level. Each of these signs was the blue arrow on the graph. By this time the pressure of sellers was evident more than a month. Chaikin Money flow was negative at all times and constantly decreasing. The sharp decline in equities, with the largest amount in about 4 months indicated that something is wrong. The final point was, when support for 118.5 has been violated, and cash flows Chaikin traded below -. 20.
Chaikin money flow and other indicators
It is best to choose the indicators that complement each other. In a recent interview with the magazine "Technical Analysis of Stocks and Commodities magazine" Marc Chaikin advised not to use indicators that have common characteristics. It would be overly analyzed and Momentum and MACD. They both are dynamic oscillators, which are based on the closing price and reflects the degree of change. Their signals will not match exactly, but to what to spend time on the analysis of both. Stochastic Oscillator Chaikin chooses, CCI and RSI as related indicators. All three are dynamic oscillators, which represent the state well perekuplennosti and pereprodannosti. Buy and sell signals are fed almost identical ways. All three are excellent indicators, but it would be a waste of time to analyze all three, when each of them will be enough.
Chaikin money flow can be used to determine the trend. If Chaikin Money flow is above zero for most of the time, it is obvious that the trend is upward. Oscillator indicates that the predominant pressure buyers. Accordingly, it would not be wise to try to get up in a short position if trend is up. By defining the ascending trend, traders can ignore the signals bear and pay attention only to signals that coincide with the trend. If the Cash flow Chaikin pointed out that the prevailing pressure of the buyers, the positive divergence, bychi crossing moving averages, bychi crossing the center line and level crossing bychi pereprodannosti be potential signals of purchase. (Byche pereprodannosti level crossing occurs when the indicator moves above the line pereprodannosti. That would be, for example for the RSI, the movement of the values below 30 to values above 30). All bear signs are ignored until the Chaikin money flow indicates that the predominant pressure buyers.
One of the possible combinations of indicators would be as follows:
- Cash flow Chaikin - "not following the trend" indicator on the basis of the volume to determine the pressure of buyers and sellers.
- RSI - a dynamic indicator used to determine levels perekuplennosti and pereprodannosti.
- Moving averages - "following the trend" indicator, which determines the main trend of the market instrument.
- Relative price - a comparative indicator for the determination of market power tool on the main index. (eg, for industrial stocks - the Dow Jones.)
These four indicators have little in common and very well complement each other.
Conclusion
Cash flow is an indicator Chaikin, who is best used in combination with other aspects of technical analysis. Although it is common practice for all indicators, but, it seems, in this case it is even more important. This oscillator, in contrast to the dynamic of oscillators does not depend on the price changes from period to period. Instead, the indicator focuses on the location of the closing of trading on the range for a certain period of time (day or week). This is the advantage of cash flow Chaikin, but may also be its weakness.
Because the Chaikin money flow does not reflect the price change from period to period, a large GEPy at the opening times do not appear in the display. Sometimes the indicator is moving in the opposite direction GEPu and can be misleading.
Starbucks (SBUX) July 1, formed a large GEO-down at high volume. Even though the event was opened with great GEPom down, she was able to close to the maximum of the day. The strong closure points to the accumulation and the high volume of reinforced this topic, providing a large jump in the indicator. The strength of a little misleading indicator and slowly declined over the next 20 days. At the 21-day figures for July 1, were removed from the calculation, and data added to the current day. This led to an immediate drop in the indicator. Cash flow Chaikin was significantly below zero for the next day, and more accurately reflect the pressure of sellers taking place in reality.
While Chaikin money flow can be used for intra-day, daily or weekly schedules, it has been designed for daily data. One day, a single period of time from the measured volume and a certain opening, maximum, minimum and closing. This certainty may be reduced in the future, due to the rapid spread of hourly bids, but locating the closure on the maximum and minimum is still quite straightforward. When dealing with the weekly or monthly data, opening and closing of the less accurate. This inaccuracy may affect the location of the closure on the maximum and minimum during the period. Weekly data is obviously more accurate than monthly, but less accurate than the daytime. This should be taken into account in the analysis of cash flows Chaikin other than full-time, periods of time.
Chaikin insisted on 21-of-time periodnoy cash flow Chaikin. If Chaikin Money flow should be used on a weekly chart, it is likely that a short time, the structure would work better. 21-day period represents about one month of trading, and takes into account some smoothing. Over a short period may be too volatile, but more of a long lag time may be too. Each marketing tool will have its own optimal structure of time.
Keep in mind that short-term trend is not so important as the absolute level. While the indicator is above zero, it is considered a bovine figure. Also, it is important to measure the period of time during which the indicator is positive. If the indicator is positive for 7 out of 9 periods, it is obvious pressure buyers. Two negative period may be regarded as a deviation and should not influence the overall picture.
Arthur Hill
stockcharts.com
stockcharts.com
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