Chaikin Money Flow Indicator Explained


Chaikin Money Flow Indicator Explained with David Moadel welcome to looking at the markets with
David Modell I’ve covered practically every technical indicator out there and
I want this YouTube channel to be kind of like an encyclopedia or a reference
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look back through the playlist which I’ll put in the description of this
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right so the check and money flow was developed by mark chicken want to give
him credit it measures the amount of money flow volume or institutional
buying and selling pressure over a specific period of time it’s usually
interpreted as more of a momentum indicator meaning that it shows the
overall trend or direction of the price action it’s usually more of that then as
an overbought oversold indicator although I’m sure it can be interpreted
that way as well and it oscillates or moves up and down within a defined range
between 1 and negative 1 with the average or center line being 0 and
usually it stays between 0.5 and negative 0.5 you don’t often see it go
all the way up to one or all the way down to negative one so how do we
interpret it well usually this is how it’s done above the zero line is
typically understood as bullish while below the zero line is typically
understood as bearish price action pretty simple and the default look-back
period on websites like stockcharts.com and tradingview dot-com and all
the default look-back period is usually 20 but that can be adjusted in most
cases and here’s the formula I often say that you don’t have to memorize the
formula it’s okay but if you’re curious to know what it is here it is so there
you go feel free to stop the video and look at that if you want to know the
specifics but you don’t have to know the specific formula to be able to use it
all right so let’s take a look and first I’ll show you on trading view dot-com
and this is what it would look like if you were to use the 1-minute candlestick
Apple candlestick chart alright so there the candlesticks I just took a snapshot
of part of a day here and here’s the second money flow and it’s on the
default setting 20/20 period or twenty candlestick look-back period there and
notice that here’s the thing about it if you use it for day trading feel free to
go ahead and adjust it accordingly because notice that because Apple stock
during this particular period it had a lot of just choppy price action
range-bound okay it was just kind of drifted so
during that time you know if you bought whenever it went the the money flow
whenever it went above the center line whenever it went positive or above zero
yeah you could have bought them and then sold or shorted if when it went below
zero into negative territory here but you would have racked up a lot of
commission costs unless you’re using Robin Hood or something like that I
guess but it would have been kind of frustrating because you would have
bought here and then sold here bought here sold here bought here during this
sideways period and that’s not always an enjoyable experience just to waste all
your trades like that it’s better when you get some directionality okay for
example if you would bought here when it broke above zero here you would have
bought here and you could have stayed in the tray at all you could have written
all the way up if you had a profit target around here somewhere and if you
had kept a stop loss it’s not always bad surely a bad idea to have a stoploss
it’s up to you but you know you might want to include a stoploss with this
because for day trading and scalping that kind of thing you probably want to
limit your losses whenever possible okay but at least if you had sold here let’s
say if you had gotten out of your position here when the money flow
indicator went into negative territory right about here you could have avoided
a lot of this a lot of pain here all right and if you had shorted you could
have done pretty well again if you got to be careful notice the long wick or
shadow on this one it’s got pretty wild over here so stop losses for day traders
or oftentimes a good idea all right so let’s look at so that was trading Viacom
this is stock charts calm and here’s what it would look like maybe if you’re
a swing trader with the daily candlestick chart alright and notice
that they kind of different looking but it’s the same idea
default is 20 so I used that for the money flow chikan money flow indicator
and again you might get chopped around here you might end up buying here when
it breaks above sell here when it breaks below that could be frustrating when you
get a buy and then a sell right after that buy and then sell right after that
that’s kind of frustrating okay but then on the other hand you could look at it
this way I mean notice there’s a lot of pain here okay a lot of losses here and
so if you stay out of the trade whenever it’s in red territory if you had done
that you would have avoided a lot not all but much of this loss and if you
stay in the trade I’m talking about a long stay in a long trade here a long
position whenever it’s green then you could have enjoyed not all little
exceptions here but you could have enjoyed most of this run up here that’s
nice right so that’s one strategy just you know stay if you’re a long the only
type of swing trader maybe just you could stay in the trade you know stay in
your position as long as it’s green and stay away whenever it’s red that’s
that’s one way to do it and you can avoid those big waterfalls as I call
them the big down moves and enjoy most of the big up moves which
is nice and this is Johnson and Johnson in the daily chart by the way all right
so that’s my quick introduction to the trike and money flow indicator if you
like my video please give this a thumbs up right now and leave a comment if you
want to let me know do you like the trike and money flow or do you prefer
other oscillators let me know what you want to see is there one I haven’t
covered yet I don’t know how many there are left I’ve covered almost all of them
I feel free to check out the playlist by the way I’m gonna leave that in the
description below this video where I’ve got a lot of free of charge videos right
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people you can contact me by email anytime David Modell at gmail.com thank
you so much I appreciate it I’ll talk to you again soon

12 thoughts on “Chaikin Money Flow Indicator Explained”

  1. Thanks david. by the way, the tech companies are having trouble especially Facebook, Ali, Google… do u think that trump will affect more these stocks? thanks so much for your opinion.

  2. luck to stumble on your video… got to ask… Chaikin Oscillator or Chaikin Money Flow? which one should i better keep on my trading system…

  3. Which indicator would you say prevents you from those losses the most? (The the market it choppy and has no direction)

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