Oscillator Chaikin (Chaikin Oscillator) is a technical indicator developed by Marc Chaikin to measure the momentum (momentum) of the Accumulation Distribution Line using the formula of MACD, is therefore an indicator of an indicator. The Chaikin Oscillator displays the difference between the 3-day EMA of Accumulation Distribution Line and the 10-day EMA of Accumulation Distribution Line. Like other momentum indicator, this indicator is designed to anticipate changes in direction, in this case the Accumulation Distribution Line, by measuring the momentum behind the movement. A change of momentum is the first step toward a turnaround. Therefore, this indicator can help to anticipate changing trends of asset analyzed. The Chaikin Oscillator generates signals with crossing above or below the zero level and the differences.
Calculation
The calculation of the Chaikin Oscillator can be divided into 4 steps, the first three for the calculation of ADL (Accumulation Distribution Line). First of all calculate the Money Flow Multiplier and second multiply this value by the volume of the session obtained the value of the Money Flow Volume. Third calculate the cumulative value of the Money Flow Volume to get the value of the ADL. Finally, we calculate the 3-day EMA of the ADL and the value result is subtracted from the value of the 10-day EMA of the ADL and gets the value of the Chaikin Oscillator.
Money Flow Multiplier = [(Close - Low) - (High - Close)] / (High - Low)
Money Flow Money Flow Volume = Multiplier x Volume for the Period
ADL = ADL + Current Previous Period's Money Flow Volume
Chaikin Oscillator = (3-day EMA of ADL) - (10-day EMA of ADL)
The ADL grows when the Money Flow Multiplier is positive and falls when the Money Flow Multiplier is negative. The Money Flow Multiplier is positive when closing the session is in the top half of high-low range of the session and is negative when it is in the bottom half. As such MACD Oscillator, Chaikin Oscillator is positive when the 3-day EMA of the ADL is greater than the 10-day EMA, and vice versa, the Chaikin Oscillator is negative when the 3-day EMA of the ADL is less than the 10-EMA days.
Chaikin Oscillator
Interpretation
First of all remember that the Chaikin Oscillator is an indicator of an indicator, measuring the momentum of the Accumulation Distribution Line. To calculate it takes at least three steps that will move away from price action: first price and volume are used to calculate the ADL, second EMAs are calculated for the ADL and third calculates the difference of these EMAs. You could say that the Chaikin Oscillator is a third derivative of the price, this will definitely make the action of the indicator and price action can often descoordinarse.
While this clear, Chaikin Oscillator indicator is designed to measure the pressure mometum purchase and sale through the Accumulation Distribution Line. A move into positive area indicates that the Accumulation Distribution Line is increasing its value and buying pressure prevails over the selling pressure. By contrast, a move into negative territory indicates that the Accumulation Distribution Line is falling and that the selling pressure is stronger than buying pressure. That is, Chaikin Oscillator crossing the zero level is a buy / sell. However, we can anticipate the crossing of the Chaikin Oscillator and zero using differences as discussed below.
Pressure Buy / Sell
The Chaikin Oscillator can be used to determine the general state of purchase or sale of the market just seeing if you have positive or negative values. Generally, the buying pressure is strongest when Chaikin Oscillator is positive and the selling pressure is strongest when it is negative.
The default Chaikin Oscillator (10.3) that refers to the EMAs used zero crossings occur very frequently, which can lead to many false signals. Behavior can be smoothed Chaikin Oscillator increasing these default values, eg 20.6 configuration shown in the image below:
Example of smoothed Chaikin Oscillator. efxto.com
In addition, you can apply the indicator trend lines to see better the overall trend of the indicator. Oscillator Chaikin that maintains a rising pitch is indicative of a stable increase of the pressure of purchase. Furthermore, the breakdown of these trend lines applied to the Chaikin Oscillator often occur before the zero crossing can be a sign earlier for the close of business (rather than the opening). Here's an example:
Example of trend lines applied to Chaikin Oscillator. efxto.com
Divergences
Differences, whether bullish or bearish, are a warning before a change in momentum pressure buy / sell that can be used to predict a change in price trend. A bullish divergence is formed when the price moves to new lows on lower (lower lows) and the Chaikin Oscillator new lows form successively larger (higher lows). Higher lows These show that the selling pressure is decreasing and that a change may be forthcoming. Similarly one can describe a bearish divergence formed when the price moves to new highs increased (higher highs) while the maximum recorded Chaikin Oscillator each is lower (lower highs). It is advisable to confirm this anticipation of change given by the differences with other tools and analysis and breakdown of support / resistance or the Chaikin Oscillator area go to positive / negative.
It can produce many discrepancies with the default settings Chaikin Oscillator, the key is to learn and be trained to distinguish the differences more robust.
Example Chaikin oscillator bullish divergence. efxto.com
As we have seen, the Chaikin Oscillator is an indicator of the Accumulation Distribution Line momenutm, is therefore an oscillator based on the flow of capital and therefore can (and should) be used in conjunction with other oscillators such as MACD price or RSI . And like all technical indicators, the Chaikin Oscillator should never be used alone.
Calculation
The calculation of the Chaikin Oscillator can be divided into 4 steps, the first three for the calculation of ADL (Accumulation Distribution Line). First of all calculate the Money Flow Multiplier and second multiply this value by the volume of the session obtained the value of the Money Flow Volume. Third calculate the cumulative value of the Money Flow Volume to get the value of the ADL. Finally, we calculate the 3-day EMA of the ADL and the value result is subtracted from the value of the 10-day EMA of the ADL and gets the value of the Chaikin Oscillator.
Money Flow Multiplier = [(Close - Low) - (High - Close)] / (High - Low)
Money Flow Money Flow Volume = Multiplier x Volume for the Period
ADL = ADL + Current Previous Period's Money Flow Volume
Chaikin Oscillator = (3-day EMA of ADL) - (10-day EMA of ADL)
The ADL grows when the Money Flow Multiplier is positive and falls when the Money Flow Multiplier is negative. The Money Flow Multiplier is positive when closing the session is in the top half of high-low range of the session and is negative when it is in the bottom half. As such MACD Oscillator, Chaikin Oscillator is positive when the 3-day EMA of the ADL is greater than the 10-day EMA, and vice versa, the Chaikin Oscillator is negative when the 3-day EMA of the ADL is less than the 10-EMA days.
Chaikin Oscillator
Interpretation
First of all remember that the Chaikin Oscillator is an indicator of an indicator, measuring the momentum of the Accumulation Distribution Line. To calculate it takes at least three steps that will move away from price action: first price and volume are used to calculate the ADL, second EMAs are calculated for the ADL and third calculates the difference of these EMAs. You could say that the Chaikin Oscillator is a third derivative of the price, this will definitely make the action of the indicator and price action can often descoordinarse.
While this clear, Chaikin Oscillator indicator is designed to measure the pressure mometum purchase and sale through the Accumulation Distribution Line. A move into positive area indicates that the Accumulation Distribution Line is increasing its value and buying pressure prevails over the selling pressure. By contrast, a move into negative territory indicates that the Accumulation Distribution Line is falling and that the selling pressure is stronger than buying pressure. That is, Chaikin Oscillator crossing the zero level is a buy / sell. However, we can anticipate the crossing of the Chaikin Oscillator and zero using differences as discussed below.
Pressure Buy / Sell
The Chaikin Oscillator can be used to determine the general state of purchase or sale of the market just seeing if you have positive or negative values. Generally, the buying pressure is strongest when Chaikin Oscillator is positive and the selling pressure is strongest when it is negative.
The default Chaikin Oscillator (10.3) that refers to the EMAs used zero crossings occur very frequently, which can lead to many false signals. Behavior can be smoothed Chaikin Oscillator increasing these default values, eg 20.6 configuration shown in the image below:
Example of smoothed Chaikin Oscillator. efxto.com
In addition, you can apply the indicator trend lines to see better the overall trend of the indicator. Oscillator Chaikin that maintains a rising pitch is indicative of a stable increase of the pressure of purchase. Furthermore, the breakdown of these trend lines applied to the Chaikin Oscillator often occur before the zero crossing can be a sign earlier for the close of business (rather than the opening). Here's an example:
Example of trend lines applied to Chaikin Oscillator. efxto.com
Divergences
Differences, whether bullish or bearish, are a warning before a change in momentum pressure buy / sell that can be used to predict a change in price trend. A bullish divergence is formed when the price moves to new lows on lower (lower lows) and the Chaikin Oscillator new lows form successively larger (higher lows). Higher lows These show that the selling pressure is decreasing and that a change may be forthcoming. Similarly one can describe a bearish divergence formed when the price moves to new highs increased (higher highs) while the maximum recorded Chaikin Oscillator each is lower (lower highs). It is advisable to confirm this anticipation of change given by the differences with other tools and analysis and breakdown of support / resistance or the Chaikin Oscillator area go to positive / negative.
It can produce many discrepancies with the default settings Chaikin Oscillator, the key is to learn and be trained to distinguish the differences more robust.
Example Chaikin oscillator bullish divergence. efxto.com
As we have seen, the Chaikin Oscillator is an indicator of the Accumulation Distribution Line momenutm, is therefore an oscillator based on the flow of capital and therefore can (and should) be used in conjunction with other oscillators such as MACD price or RSI . And like all technical indicators, the Chaikin Oscillator should never be used alone.
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