Price tells you where the market went; Chaikin Money Flow tries to tell you whether buyers or sellers did the heavy lifting getting it there.
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Chaikin Money Flow (CMF) measures buying versus selling pressure by combining where price closes within each bar's range with volume, summed over a lookback period. Closes near the high on high volume add positive money flow; closes near the low on high volume add negative. It oscillates around zero as a read on accumulation vs. distribution.
Reading CMF
CMF above zero = buying pressure dominates (accumulation); below zero = selling pressure (distribution). The further from zero, the stronger the pressure. Sustained positive CMF supports an uptrend's health; CMF crossing below zero warns of weakening demand. It's a volume-weighted read on who's in control beneath the price — a smoothed relative of delta.
How to use it
Use CMF for trend confirmation and divergence. Rising price with positive, rising CMF confirms real buying behind the move; rising price with falling CMF (a divergence) warns the rally lacks volume support — an exhaustion hint at a level. As a filter, positive CMF backs long setups, negative CMF backs shorts. It pairs with the accumulation/distribution line, which tracks the same idea cumulatively.
CMF asks whether volume is confirming the move. A rally on fading money flow is a rally without buyers — a warning at a level.
The limits
CMF is a lagging, smoothed indicator that can diverge for a long time before price responds, so it's confirmation, not a trigger. It uses closing position within the bar, which can mislead on gappy or thin bars. Use it to grade whether a move has volume conviction — especially at a level — not as a standalone buy/sell signal.
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