Chaikin Money Flow (CMF) is a volume-weighted average of accumulation/distribution over a specified period. Developed by Marc Chaikin, CMF measures buying and selling pressure, oscillating between -1 and +1. Positive values indicate buying pressure (accumulation); negative values indicate selling pressure (distribution). CMF helps confirm trends and spot divergences.
- Ranges from -1 (all selling) to +1 (all buying)
- Positive = buying pressure; Negative = selling pressure
- Volume-weighted measure of money flow
How CMF Works
CMF measures money flow over a period:
CMF Calculation:
Step 1: Money Flow Multiplier (MFM)
MFM = ((Close - Low) - (High - Close)) / (High - Low)
Ranges from -1 to +1
Step 2: Money Flow Volume
MFV = MFM × Volume
Step 3: CMF (typically 20-21 periods)
CMF = Sum of MFV / Sum of Volume
Example:
If close is at the high: MFM = +1 (all buying)
If close is at the low: MFM = -1 (all selling)
If close is at midpoint: MFM = 0 (neutral)
Quick Reference: CMF Levels
| CMF Value | Interpretation | Signal |
|---|---|---|
| Above +0.25 | Strong buying | Bullish |
| +0.10 to +0.25 | Moderate buying | Bullish bias |
| -0.10 to +0.10 | Neutral | No clear bias |
| -0.25 to -0.10 | Moderate selling | Bearish bias |
| Below -0.25 | Strong selling | Bearish |
Example: Trading with CMF
CMF Trend Confirmation:
| Day | Price | CMF | Analysis |
|---|---|---|---|
| 1 | $100 | +0.15 | Buying pressure |
| 5 | $105 | +0.25 | Strong buying |
| 10 | $112 | +0.30 | Price rising with CMF - CONFIRMED |
| 15 | $115 | +0.10 | CMF weakening |
| 20 | $118 | -0.05 | Price up, CMF down - DIVERGENCE |
Chaikin Money Flow measures buying and selling pressure, ranging from -1 to +1. Positive CMF indicates accumulation; negative indicates distribution. CMF above +0.25 is strong buying; below -0.25 is strong selling. Use CMF to confirm trends and spot divergences.
CMF Trading Strategies
Trend Confirmation
CMF positive with rising price confirms uptrend. CMF negative with falling price confirms downtrend.
Zero-Line Crossover
Buy when CMF crosses above zero. Sell when CMF crosses below zero.
Divergence
Price makes new high but CMF makes lower high = distribution happening. Price makes new low but CMF makes higher low = accumulation happening.
Strength Filter
Only take long trades when CMF is above +0.10. Only take short trades when CMF is below -0.10.
CMF vs Other Indicators
| Indicator | Range | Cumulative? |
|---|---|---|
| CMF | -1 to +1 | No (period-based) |
| OBV | Unbounded | Yes |
| A/D Line | Unbounded | Yes |
| MFI | 0 to 100 | No |
Interpreting CMF
Persistently Positive
Strong accumulation. Smart money buying. Uptrend likely to continue.
Persistently Negative
Strong distribution. Smart money selling. Downtrend likely to continue.
Crossing Zero
Shift in money flow direction. Potential trend change.
Divergence
Most powerful signal. Price and CMF disagreeing warns of reversal.
Common Mistakes
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Ignoring divergences – Divergences are CMF’s most valuable signal.
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Using alone – CMF is a supporting indicator. Use with price action.
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Wrong period – 20-21 days is standard. Shorter for day trading.
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Expecting exact signals – CMF shows pressure, not exact entry points.
How JournalPlus Tracks CMF
JournalPlus logs CMF readings at entry, helping you analyze whether money flow conditions improve your trade selection and timing.
