Chaikin Money Flow (CMF)
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Definition
Chaikin Money Flow sums the volume-weighted Close Location Value over a lookback (default 20-21) and normalizes by total volume, producing a bounded oscillator (roughly -1 to +1) that gauges buying vs. selling pressure over that window.
How to read it
CMF above zero indicates net accumulation (buying pressure) over the period; below zero indicates distribution. Readings persistently above ~+0.10 signal strong buying; below ~-0.10 strong selling; near zero is neutral/indecisive. Unlike the cumulative A/D line, CMF is a fixed-window, bounded measure, so its level is directly interpretable and comparable across time and instruments. The zero-line crossover is a common bull/bear money-flow signal.
How practitioners use it
Used as context among multiple indicators — never as a standalone signal to act.
Less common professional uses
CMF uses the same close-location multiplier as the A/D line, so it inherits the gap-blindness distortion - a gap-down bar that closes near its high reads as accumulation. The lookback length materially shifts CMF's responsiveness and zero-crossing frequency; a too-short window whipsaws around zero, so avoid tuning it to backtests (over-optimization). CMF near zero is genuinely ambiguous (not bearish); reading small negative values as strong sell signals is a common misuse - require a meaningful threshold (e.g. beyond +/-0.05 to 0.10).
Sources & provenance
Marc Chaikin
This page is educational content published by Pachira Aquatica Global LLC. It is not investment advice and not a recommendation.