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How Chaikin Money Flow (CMF) to indicates buying and selling pressure

Marc Chaikin is a developer of Accumulation Distribution Line and also Chaikin Money Flow indicator.  Chaikin Money Flow indicator measure the volume of money flow over time that simply sums Money Flow Volume for 20 or 21 days.

Calculation based on 21 days.

1. Money Flow Multiplier = [(Close  -  Low) - (High - Close)] /(High - Low)

2. Money Flow Volume = Money Flow Multiplier x Volume for the Period

3. 201-period CMF = 201-period Sum of Money Flow Volume / 20 period Sum of Volume

Interpretation of Marc Chaikin is based on oscillator. A move into positive chart indicates buying pressure, while a move into negative chart indicates selling pressure. You should add buffer below and above zero line to avoid noise signal.  You can set threshold a little above zero (+0.05) for buying signal and below zero (-0.05) for selling signal to reduce bad signal and reduce whipsaws. You can use Chaikin Money Flow as supporting indicator for RSI and MACD.

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