Chaikin Money Flow Indicator Explained with David Moadel
welcome to looking at the markets with David Modell I've covered practically
every technical indicator out there and I want this YouTube channel to be kind
of like an encyclopedia or a reference guide for you to look up all the
technical indicators so feel free to look back through the playlist which
I'll put in the description of this video where I cover a lot of technical
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you anything except a few seconds all right so the check and money flow was
developed by mark chicken want to give him credit it measures the amount of
money flow volume or institutional buying and selling pressure over a
specific period of time it's usually interpreted as more of a momentum
indicator meaning that it shows the overall trend or direction of the price
action it's usually more of that then as an overbought oversold indicator
although I'm sure it can be interpreted that way as well and it oscillates or
moves up and down within a defined range between 1 and negative 1 with the
average or center line being 0 and usually it stays between 0.5 and
negative 0.5 you don't often see it go all the way up to one or all the way
down to negative one so how do we interpret it well usually this is how
it's done above the zero line is typically understood as bullish while
below the zero line is typically understood as bearish price action
pretty simple and the default look-back period on websites like stockcharts.com
and tradingview dot-com and all the default look-back period is usually
20 but that can be adjusted in most cases and here's the formula I often say
that you don't have to memorize the formula it's okay but if you're curious
to know what it is here it is so there you go feel free to stop the video and
look at that if you want to know the specifics but you don't have to know the
specific formula to be able to use it all right so let's take a look and first
I'll show you on trading view dot-com and this is what it would look like if
you were to use the 1-minute candlestick Apple candlestick chart alright so there
the candlesticks I just took a snapshot of part of a day here and here's the
second money flow and it's on the default setting 20/20 period or twenty
candlestick look-back period there and notice that here's the thing about it if
you use it for day trading feel free to go ahead and adjust it accordingly
because notice that because Apple stock during this particular period it had a
lot of just choppy price action range-bound
okay it was just kind of drifted so during that time you know if you bought
whenever it went the the money flow whenever it went above the center line
whenever it went positive or above zero yeah you could have bought them and then
sold or shorted if when it went below zero into negative territory here but
you would have racked up a lot of commission costs unless you're using
Robin Hood or something like that I guess but it would have been kind of
frustrating because you would have bought here and then sold here bought
here sold here bought here during this sideways period and that's not always an
enjoyable experience just to waste all your trades like that it's better when
you get some directionality okay for example if you would bought here when it
broke above zero here you would have bought here and you could have stayed in
the tray at all you could have written all the way up if you had a profit
target around here somewhere and if you had kept a stop loss it's not always bad
surely a bad idea to have a stoploss it's up to you but you know you might
want to include a stoploss with this because for day trading and scalping
that kind of thing you probably want to limit your losses whenever possible okay
but at least if you had sold here let's say if you had gotten out of your
position here when the money flow indicator went into negative territory
right about here you could have avoided a lot of this a lot of pain here all
right and if you had shorted you could have done pretty well again if you got
to be careful notice the long wick or shadow on this one it's got pretty wild
over here so stop losses for day traders or oftentimes a good idea all right so
let's look at so that was trading Viacom this is stock charts calm and here's
what it would look like maybe if you're a swing trader with the daily
candlestick chart alright and notice that they kind of different looking but
it's the same idea default is 20 so I used that for the
money flow chikan money flow indicator and again you might get chopped around
here you might end up buying here when it breaks above sell here when it breaks
below that could be frustrating when you get a buy and then a sell right after
that buy and then sell right after that that's kind of frustrating okay but then
on the other hand you could look at it this way I mean notice there's a lot of
pain here okay a lot of losses here and so if you stay out of the trade whenever
it's in red territory if you had done that you would have avoided a lot not
all but much of this loss and if you stay in the trade I'm talking about a
long stay in a long trade here a long position whenever it's green then you
could have enjoyed not all little exceptions here but you could have
enjoyed most of this run up here that's nice right so that's one strategy just
you know stay if you're a long the only type of swing trader maybe just you
could stay in the trade you know stay in your position as long as it's green and
stay away whenever it's red that's that's one way to do it and you can
avoid those big waterfalls as I call them the big down moves
and enjoy most of the big up moves which is nice and this is Johnson and Johnson
in the daily chart by the way all right so that's my quick introduction to the
trike and money flow indicator if you like my video please give this a thumbs
up right now and leave a comment if you want to let me know do you like the
trike and money flow or do you prefer other oscillators let me know what you
want to see is there one I haven't covered yet I don't know how many there
are left I've covered almost all of them I feel free to check out the playlist by
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