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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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Chaikin Oscillator

The final signal developed by Marc Chaikin is the Chaikin oscillator, which tracks money flow using an exponential moving average (EMA) for two time periods. EMA weighs the later entries more heavily than earlier entries, so the most recent price and volume have more influence on the outcome.

Although this is calculated automatically for you through free online charting services like StockCharts.com, the formula reveals how the components of price and volume are used together to develop this indicator. The first step in the three-part calculation is to derive the money flow multiplier (MFM):

[ ( (Close – Low) – (High – Close) ) ÷ (High – Low) ] × Volume = MFM

Next, MFM is added to or subtracted from the A/D line examined earlier ...

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