💹 Chaikin Money Flow (CMF)

The CMF is an indicator created by Marc Chaikin that compares buying pressure with selling pressure, revealing the interest of buyers and sellers for a security. It shows phases of accumulation and distribution, confirming the strength of a trend or signaling possible reversals.

Formula: ((( C-L ) – ( H-C )) / ( H-L )) * V

Where: C = closing price, L = lowest price, H = highest price, V = volume. Interpretation: Positive CMF: greater buying pressure. Negative CMF: greater selling pressure.

It can be used by looking for divergences between CMF and price.

Bullish divergence: CMF marks new highs while price marks new lows. Bearish divergence: CMF marks new lows while price marks new highs.

Or it can be used by looking for peaks and depressions:

Peak above 70: money flowing in at an extreme rate, possible bullish excess. Low below 30: money flowing out at an extreme rate, possible bearish excess.