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Does Chaikin money flow indicator work? What’s the win rate of the Chaikin money flow indicator strategy? Will it perform as good as some of the other trading strategies we have tested 100 times or even better? Well, why don’t we test the Chaikin money flow trading strategy 100 times and find out.
We test many different trading strategies 100 times to see if they actually work or not. If you are watching the Trading Rush channel for the first time, don’t forget to subscribe and ring that notification bell, after all you don’t want to trade with a not good strategy.
If you plot the Chaikin money flow or CMF on trading view, you will notice that it comes with one line that oscillates between positive one and negative one. Chaikin money flow is used to find the direction of a trend and the buying and selling pressure.
It was created by Marc Chaikin who is a stock trader and has created many other indicators, one of them is the Accumulation Distribution. Since chaikin money uses volume to calculate its values, it will work better on the stock market where volume is more readable.
When the Chaikin money flow is below the zero line, it indicates a down trend or a selling pressure, and when the Chaikin money flow is above the zero line, it means there is a buying pressure.
So here’s how the Chaikin money flow trading strategy works.
When the Chaikin money flow line crosses above the zero line, it’s a buy signal.
Similarly, when the Chaikin money flow line crosses below the zero line, it’s a sell signal.
Also, it is a good idea to use it with a 200 period moving average to find the end of a pullback in a trend.
So here’s how the complete chaikin money flow trading strategy goes.
Buy when the Chaikin money flow line crosses above the zero line if price is above the 200 period moving average. Price above the 200 period moving average indicates an uptrend. Set the stop loss below the pullback.
And sell when the Chaikin money flow line crosses below the zero line if price is below the 200 period moving average. Price below the 200 period moving average indicates a down trend. Your stop loss goes above the pullback.
Here, price is above the 200 period moving average, and the CMF is crossing above the zero line. Your entry is at the closing price of the first candle that closes above the zero line.
And here, price is below the 200 moving average, and the CMF is crossing below the zero line. The entry is at the closing price of the first candle that crosses below the zero line.
Now anyone can show few winning trades, but will the Chaikin money flow work in the long run. Can you make money with it? Let’s find out!
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