Volume · Indicator
CMF sums volume weighted by where each bar closes within its range, oscillating between -1 and +1 around a zero line.
Overview
Chaikin Money Flow, developed by Marc Chaikin, sums money-flow volume over a period, scaled by where price closes within each bar's range. Values above zero indicate buying pressure and values below zero indicate selling pressure. The result oscillates between -1 and +1, though in practice it rarely strays beyond about -0.5 to +0.5.
The distinguishing idea is the close location value. Rather than assigning volume to buyers or sellers based on whether the bar closed up or down against the previous bar, CMF looks at where the close sat within the bar's own high-low range. A bar that closed at its high contributes its entire volume as positive flow; one that closed at its low contributes all of it as negative; one that closed in the middle contributes almost nothing either way.
Because the numerator is divided by total volume over the same window, CMF is a ratio rather than a running total. That makes it directly comparable across instruments and across time, which is the main practical advantage it has over On-Balance Volume, whose absolute level is arbitrary.
How it is calculated
For each bar, the money flow multiplier expresses the close's position within the bar's range on a scale from -1 at the low to +1 at the high. Multiplying by the bar's volume gives money flow volume, the portion of that bar's volume attributed to buyers or sellers.
Summing money flow volume over the lookback and dividing by total volume over the same window normalises the result. Bars with zero range are treated as contributing nothing, since the multiplier is undefined.
Money flow multiplier = ((close - low) - (high - close)) / (high - low) Money flow volume = Money flow multiplier * Volume CMF = sum(Money flow volume over N) / sum(Volume over N)
Inputs
How to read it
The zero line is the key reference. CMF above zero says that, over the window, volume has been concentrated in bars that closed in the upper part of their range; below zero says the opposite. Sustained readings on one side describe persistent accumulation or distribution better than any single bar can.
Magnitude indicates how one-sided the pressure has been. Readings beyond about +0.25 or -0.25 are usually considered strong, and readings hovering near zero say buying and selling have been roughly balanced regardless of what price did. It is quite common for price to trend while CMF sits near zero, which is itself informative.
Duration matters more than a single crossing. A brief dip below zero in an otherwise positive stretch is less meaningful than a sustained move to the negative side, so traders generally look at how long CMF has held a side rather than reacting to each crossing.
Signals to look for
CMF crossing from negative to positive indicates volume has shifted towards bars closing in the upper part of their range, which is read as a change from net selling to net buying pressure.
CMF holding above or below zero for an extended run is treated as evidence of accumulation or distribution, and is used to confirm that a price trend has volume behind it.
Price making a new high while CMF weakens or turns negative indicates the advance is occurring on bars that are closing poorly within their ranges, which is read as a warning about the move's quality.
Limitations
Frequently asked questions
CMF sums volume weighted by where each bar closes within its range, oscillating between -1 and +1 around a zero line.
The zero line is the key reference. CMF above zero says that, over the window, volume has been concentrated in bars that closed in the upper part of their range; below zero says the opposite. Sustained readings on one side describe persistent accumulation or distribution better than any single bar can.
Zero-line cross: CMF crossing from negative to positive indicates volume has shifted towards bars closing in the upper part of their range, which is read as a change from net selling to net buying pressure.
The close location value ignores gaps entirely. A bar that gapped down heavily but then rallied to close at its high registers as strong buying, even though the session ended far below the previous close.
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