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  • Chaikin Money Flow (CMF) Indicator

Chaikin Money Flow (CMF) Indicator

  • Posted by Abhilash Bandari
  • Date December 11, 2020

 

  • Chaikin Money Flow is a technical indicator used to analyse the stock market. 
  • It measures the accumulation-distribution line of moving average convergence-divergence (MACD), using price and volume traded as the inputs.

 

 

 

 

Formula for Chaikin Money Flow Indicator:

  1. N = ((close – low) – (high – close))/(high – low)
  2. M = N * volume(period)
  3. Accumulation-Distribution Line (ADL) = M(period-1) + M(period)
  4. CMF = (3-day EMA of ADL) – (10-day EMA of ADL)

 

  • N = money flow multiplier;
  • M= money flow volume;
  • CMF = Chaikin Money Flow indicator;
  • EMA = Exponential Moving Average;

 

  • The Chaikin money flow indicator is mainly used to identify the underlying momentum during price fluctuations in accumulation-distribution.
  • Whenever a positive divergence is observed along with the CMF indicator crossing above the ADL (dotted line in the image), it indicates a potential buy signal.
  • Existing traders can exit their long positions and initiate long unwinding. New traders can enter the market and initiate their short positions.
  • Similarly, whenever a negative divergence is observed along with the CMF indicator crossing below the ADL (dotted line in the image), it indicates a potential sell signal.
  • Existing traders can exit their short positions and initiate short covering. New traders can enter the market and initiate their long positions.

This is the 1 day chart of Infosys Ltd around Jan-Aug, 2020

The dotted line indicates ADL line

 

  • A positive divergence indicates that the stock price rises, given that accumulation increases. Similarly, a negative divergence indicates that the stock price falls, given that distribution increases.
  • The main disadvantage of this indicator is that it is difficult to use because of its complexity and many calculations. Inexperienced traders might take false signals from the indicator and fall into losses.
  • Hence, traders should gain experience from sample trades before using this indicator.
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Abhilash Bandari

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Money Flow Index (MFI) Indicator
December 11, 2020

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December 13, 2020

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Company Summary

Bajaj Electricals Limited is engaged in engineering and projects; power distribution, illumination and consumer durables businesses.

It has a range of domestic and kitchen appliances comprising water heaters, room heaters, coolers, irons, mixers, induction cookers, toasters, kettles, microwave, rice cookers, gas stoves, non-electrical kitchen aids and pressure cookers.

It offers ceiling, table, pedestal, wall, fresh air and industrial fans, and lighting solutions, such as light sources, light emitting diode-based lighting products, domestic luminaires, torches and lanterns.

Key Highlights of Company Business

Segments and Products

The Company's business segments consist of

  1. Lighting;
  2. Consumer Durables;
  3. Engineering & Projects,

The Lighting segment includes lamps, tubes and luminaries.

The Consumer Durables segment includes appliances and fans.

The Engineering & Projects segment includes transmission line towers, telecommunications towers, highmast, poles and special projects.

The Others segment includes diecasting and wind energy.

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