# Chaikin Money Flow (CMF) | MT4 indicators

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# Chaikin Money Flow (CMF)

Chaikin Money Flow (CMF) is an indicator of market power developed by Marc Chaikin, who became a stockbroker in 1966. For the most part, CMF is based on the Accumulation / Distribution (A / D) indicator because it compares closures and pairs with ranges (high and low). Ie of the pair for the same period backward to determine whether money flows in or out of the pair during that period. The default retreat period, as suggested by Marc Chaikin, is 21 days. As a general rule, when the CMF indicator rises, this means that money starts flowing to the pair. And when the CMF indicator goes down, this means that money starts flowing out of the pair.

The CMF indicator is calculated in four stages. In the first step, the Money Flow Multiplier is calculated for each period that forms backward periods using the formula:

### Money Flow Multiplier = ((Close – Low) – (High – Close)) / (High – Low)

In the second step, the Volume Money Flow is calculated by multiplying the volume of each period and the Money Flow Multiplier:

### Money Flow Volume = Volume x Money Flow Multiplier

In the third step, the amount of the Money Flow Volume for the period back is calculated by adding the Money Flow Volume to each period of its compilers.

So the amount of Money Flow Volume for the period backward divided by the amount of period Volume backward.

#### The result is a line that is oriented above and below the zero lines as it fluctuates between +1 and -1.

As with Accumulation / Distribution (A / D) and On Balance Volume (OBV), the direction of CMF indicates a buy or sell strength with an increased CMF indicating an increase in demand for the pair, while a decreasing CMF indicates a decrease in demand for the pair.

The CMF indicator is also included in the oscillator indicator type which is above and below the zero lines. Thus, when the CMF crosses above the zero lines then this indicator gives a potential buy signal to place a buy position in the market. Conversely, when the CMF crosses below the zero lines, it provides a potential sell signal to place a sell position in the market.

The divergence analysis can also be applied to CMF. As per the rules of general divergence.

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