Forum on trading, automated trading systems and testing trading strategies
Indicators: Chaikin Oscillator (CHO)
newdigital, 2013.09.03 14:06
The Chaikin Oscillator or Volume Accumulation Oscillator consists of the difference between two exponential moving averages (usually 3 and 10-day) of the Accumulation Distribution Line indicator and is used to confirm price movement or divergences in price movement. The Chaikin Oscillator is more accurate than the On Balance Volume indicator.
- On Balance Volume: adds all volume for the day if the close is positive, even if the stock closed only a penny higher or subtracts all volume for the day if the stock closes lower.
- Chaikin Oscillator: factors in the closing price in relation to the highs, lows, and average price and determines the appropriate ratio of volume to be attributed to the day.
The main purpose of the Chaikin Oscillator is to confirm price trends and warn of impending price reversals. The chart below of the Nasdaq 100 ETF QQQQ illustrates these confirmation signals and divergence signals:
The Nasdaq 100 ETF QQQQ made higher highs, usually a bullish sign. However, the Chaikin Oscillator failed to mirror the QQQQ's advance higher and ended up making a lower low. This bearish divergence forewarned of the impending price reversal.
High #2 to High #3The QQQQ's made a significantly lower high. The Chaikin Oscillator confirmed the QQQQ's downtrend by making a lower high as well.
Low #1 to Low #2The Nasdaq 100 made significant lower lows, yet the Chaikin Oscillator made higher lows. This bullish divergence signaled that the previous downtrend may have ended.
The Chaikin Oscillator is a helpful volume based technical indicator that helps confirm the current price action or foreshadow future price reversals. Other technical indicators similar to the Chaikin Oscillator is the On Balance Volume indicator![MQL5 - Language of trade strategies built-in the MetaTrader 5 client terminal](https://c.mql5.com/i/registerlandings/logo-2.png)
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
CMF Indicator (Chaikin Money Flow):
This indicator incorporates the volume to inform the market trend.
Provides three types of typical signals:
Author: Jose Miguel Soriano Trujillo