Confirming trend direction and entry and exit points using the Chaikin Money Flow Indicator

As mentioned in the previous post the Chaikin Money Flow indicator measures the buying and selling pressure for a certain calculation period, therefore, its technical functionality allows confirming the direction of the trend.

Consequently, when the Chaikin Money Flow indicator develops movements above zero (0) towards the positive zone, it indicates that the buying pressure exceeds the selling pressure, and in the opposite case, when it generates movements below zero (0) towards the negative zone, it serves as a guide to associate that the selling pressure is greater than the buying pressure.

Exit point of sale

If in a given market we observe an uptrend, and then we observe that the positive values of the Chaikin Money Flow indicator begin to decrease towards the zero (0) line and cross with negative values, it is a sign of weakness of the trend and an opportunity to sell.

Screenshot from Huobi portal

In the chart above, you can see the exit signal and sell point in the ADA/USDT pair above $2.58.

Point of purchase entry

In the opposite case, if in a given market we observe a downtrend, and then we observe that the negative values of the Chaikin Money Flow indicator begin to rise towards the zero (0) line and cross with positive values, it is a sign of weakness of the trend and an opportunity to buy.

Screenshot from Huobi portal

See the above chart for an entry signal and buy point on the ZIL/USDT pair near $0.079.

I hope that the information shared will serve as a kind of simple guide to learn how to use the Chaikin Money Flow, since knowing its basic principles will allow us to combine it with different indicators to create more effective trading strategies and therefore allow us to cut losses. In the next post I will continue to expand on some technical approaches to the Chaikin Money Flow indicator.

SOURCES CONSULTED

Tradingsim Chaikin Money Flow Indicator Review. Link

OBSERVATION:

The cover image was designed by the author: @lupafilotaxia, incorporating image: Binance

Greetings @lupafilotaxia, you certainly explain us the behavior of a great indicator, which can be adapted to our trading strategy, just simply demonstrate its operation through demo accounts. Regards

Hi @madridbg

I didn't really use DEMO accounts the trades were real, it is certainly a great indicator that when used in conjunction with other indicators we will have signals with less noise.

Best regards, be well

Hi @madridbg

I didn't really use DEMO accounts the trades were real, it is certainly a great indicator that when used in conjunction with other indicators we will have signals with less noise.

Best regards, be well

Hi friend @lupafilotaxia.

As usual you share with us another wonderful delivery, this time related to the Chaikin cash flow indicator, which I see it really useful to improve our trading strategies as you have advised.

Thank you for such excellent information. Greetings and many successes for you and your family.

Hello friend @rbalzan79

Glad you found in socialized content useful for you, Chaikin Money Flow indicator is a good tool to get ahead of price action movements.

Best regards, be well.

This indeed is a very good indicator proving good entry and exit signal although using it with other indicators can provide good results thanks for sharing.

Hi friend @mccoy02

It is true what you say, the ideal is to combine the Chaikin Money Flow indicator with another technical analysis tool that gives us a better perspective of the price action.

Best regards, be well.