Chaikin Cash Flow Indicator (CMF)
Description
Many of us are in constant search of additional income and this will not surprise anyone. Everyone thinks about financial independence and is looking for ways to earn extra money. Remote networking is the most comfortable way to get additional capital. Most often, easy money is offered here, but wages are usually in doubt.
It is not for nothing that binary options trading has become popular so quickly and continues to gain momentum, allowing you to become the main one from additional earnings. Trading is completely legal, brokers fulfill all obligations to market players, and you can get the first money in 30 seconds.
First of all, it is reliable, promising, and those who understand this, think over their profitable trading strategy, test robots and trading systems, are in search of profitable signals, study new indicators, track promotions and bonuses, broker ratings. You will find all this data and even more useful things on our resource. Our today’s review is devoted to the Chaikin Cash Flow indicator.
Chaikin Money Flow (CMF) is a popular binary options trend indicator that quickly and accurately determines the movement of a trend in the market at the moment. The author of the tool is the famous trader Mark Chaikin (who created the popular CHO and CHV), who introduced it to the public back in 1966. And although a lot of time has passed, to this day CMF is considered one of the most profitable in trading.
In order to be a successful trader, it is important to track the dynamics of the market, see the stages of trend change and be able to use it. One of the most effective tools to make a lot of money is CMF.
Working in the market, M. Chaikin focuses on the volume indicator, according to his theory, powerful trends are always reflected in the dynamics of volume: if an asset rises in price, the actions of buyers are more aggressive, volumes grow; If the trend remains in the same state, and major market players sell assets, this indicates a reversal, volumes begin to outpace the price.
You can learn more about the possibilities of CMF in the MetaTrader 4 terminal in the image below. You can also easily download the MetaTrader 4 platform and get acquainted with its features in practice.
What is the working principle of the CMF indicator?
To work successfully in the market, it is important for a trader to know about his mood and work with proven tools. One of the most accurate trend indicators is Chaikin’s Cash Flow. Like A/D, it is based on the accumulation and distribution of trading volume, showing leading data on the growth or decay of a trend.
CMF should not be confused with the Money Flow Index, it is the Cash Flow that is considered the most informative and effective. On the chart, it is located in a separate window, in the form of a curve that takes values from 1 to -1. The main principle of its operation lies in its connection with the distribution line, which determines the strength of the trend movement, based on the closing points:
- if a specific closing level is located at recent market highs, this is an upward movement,
- If the price chart moves to the lows, it indicates a downtrend.
This is an excellent profitable tool that allows you to simultaneously work with the price indicator, comparing it with the market volume.
The formula for calculating the indicator:
Sum ((((C-L) – (N-C)) / (H-L)) * V) / sum (V), where:
C — closing price;
L is the minimum;
H is the maximum;
V is the volume (period 21).
Info taken from website biznes-institut.ru
Indicator signals
Trend signals
- if a specific closing level is located at recent market highs – this is an upward movement, you can buy call options,
- if the price chart moves to the lows, this indicates a downtrend, it is worth buying PUT options.
Signals of crossing the zero mark
- If the CMF line is above the zero line, you can buy CALL options,
- If the CMF line is below the zero line, it is worth purchasing PUT options.
Signals of discrepancy between the CMF and the price
- The situation of divergence arises on an upward trend: when price highs are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying call options,
- The situation of convergence arises on a downward trend: when price lows are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying put options.
Do I need to install the CMF indicator in your platform?
CMF is a non-standard indicator of trading on the stock exchange, it is not included in the basic list of tools of the MetaTrader 4 platform. To work with it, download it for free here. Next, install the file in MT4, following the simple instructions here.
After installing the CMF, it remains to add it to the price chart, for this:
- Click the “Insert” tab in the top menu of the platform
- Select the tab “Custom” – “CMF”.
When you add a tool, a window of available settings will automatically open in front of you:
- Visual settings
- Period (the optimal value is 21).
Application of the indicator for binary options
Chaikin Money Flow is one of the most popular trend tools, which, when used correctly, makes it possible to earn decent money, accurately showing who is currently leading the market: bulls or bears. The indicator line is constantly located at the zero mark, which is a simple way to determine signals:
- If its line is above the zero line, you can buy call options,
- If the line is below the zero line, it is worth purchasing PUT options.
In this case, it is worth considering the fact how long the instrument is located in a particular area (negative or positive). The longer the indicator is located in one of these areas, the stronger the option purchase signal.
Today, traders widely use the tool, it is most common in determining the market trend. CMF is also able to most accurately show divergences from the price line (divergences and convergences). When the market dynamics of volumes contradicts the movement of quotations, this indicates that money is growing in the opposite direction and a change in trend is expected.
As a reliable tool, Chaikin Cash Flow is able to generate simple but profitable signals, showing the best results unlike other volume instruments. It works best on daily charts (days and even weeks), on smaller timeframes the signal deteriorates. It is recommended to combine it with other instruments (e.g. RSI, Stochastic, CCI , etc.).
Rules for concluding transactions (screenshots)
Trading with a trend signal
If a specific closing level is located at recent market highs – this is an upward movement, you can buy call options. In the image below, you can observe an upward trend in the MT4 terminal:
Place a CALL bet with the Binomo broker by going to the binomo.com website, prepare an option for trading, indicating:
- Option
- Expiration
- Amount
- Prediction: up
- Next, by clicking the “buy” button, expect the results:
If the price chart moves to the lows, this indicates a downtrend, it is worth buying PUT options. In the image below, you can observe a downward trend in the MT4 terminal:
Place a PCI bet with the Binomo broker by going to the binomo.com website, prepare an option for trading, indicating:
- Option
- Expiration
- Amount
- Prediction: down
- Next, by clicking the “buy” button, expect the results:
Trading when the zero mark is crossed
If the CMF is above the zero line, you can buy call options. In the image below, you can observe an upward trend in the MT4 terminal (place a CALL bet on the binomo.com website, instructions are presented above):
If the CMF line is below the zero line, it is worth purchasing PUT options. In the image below, you can observe a downward trend in the MT4 terminal (place a PUT bet on the binomo.com website, instructions are presented above):
Trading with a signal of a discrepancy between the CMF and the price
A divergence signal occurs on an uptrend: when price highs are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying call options. In the image below, you can observe the divergence in the MT4 terminal (place a CALL bet on the binomo.com website, instructions are presented above):
A convergence signal occurs on a downtrend: when price lows are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying put options. In the image below, you can observe convergence in the MT4 terminal (place a PCI bet on the binomo.com website, the instructions are presented above):
Money management
Money management is one of the main market tools that determine the success of trading, as well as allow you to achieve the best performance in trading. Beginners of options should get acquainted with it as early as possible, as well as those who decided to reach a stable profit from trading.
Minimum capital: when working with options on the stock exchange, we recommend that you bet a minimum of your capital on the purchase of a specific asset; At the same time, the price of the asset should not be more than 5% of the account size; Participate in the trading of inexpensive options, the purchase of which will not affect the size of the deposit in case of losses. By mastering trading according to these simple rules, you will be able to save your capital as much as possible.
Minimum deposit: working with options on the exchange, we recommend participating in such transactions that will easily support your deposit; when buying a specific asset, you should not transfer your entire account to it; On the contrary, work with your account so that it lasts for a long time, giving you the opportunity to earn more. By mastering trading according to these simple rules, you will be able to save and increase your deposit.
Minimum options: when working with options on the stock exchange, we recommend purchasing a minimum of assets, for example, 2 or 3; This rule applies to newcomers to the exchange who do not yet have trading experience; As soon as you become more experienced, calmly increase the number of transactions. By mastering trading according to these simple rules, you will be able to achieve good results from trading.
Minimum emotions: when working with options on the stock exchange, we recommend that you have the right attitude; remember that successful trading is the clarity and balance of your decisions; Do not let emotions get the better of you, because They are able to work against you and your result. By mastering trading according to these simple rules, you can become a successful trader.
Expiration
Expiration (from the English Expiration, “end”) is the moment of completion of trading in a specific asset, it is then that all exchange participants have set forecasts and learn about their effectiveness. Expiration is also a concept without the conscious use of which it is difficult to get the most out of trading.
Types of options:
- Ultra-short options – 30 seconds – 5 minutes.
- Short-term options – 10 minutes – several hours.
- Medium-term options – a day – a few weeks.
- Long-term options – a month – six months.
Is it allowed to extend the expiration?
It is allowed, but not on all platforms. Such a convenient function gives you the opportunity during trading, with the specified wrong decision, to extend the expiration time and reduce your losses.
Expiration rules:
- If you are still new to options and you have no trading experience, work with long-term transactions, the most stable, characterized by a minimum risk of your losses.
- If you are already a professional in options, work with such an expiration that will be most comfortable for you and will give you the necessary profit.
- If instant money is important to you from binary options trading, work with short-term expiration, which is able to bring the first capital in 30 seconds.
- If it is important for you to acquire a stable income from binary options trading, work with a long-term expiration, which will become the most reliable and will bring you decent money.
Expiration in strategies with CMF
Expiration at a trend signal
Short-term trading: not recommended; despite the fact that CMF is able to generate accurate market trend signals; In this case, professionals recommend avoiding trading due to the increased risks of transactions.
Medium-term expiration: recommended; on daily and weekly expirations, CMF generates accurate profitable market trend signals; Professionals advise combining Chaikin’s cash flow with the help of additional tools.
Long-term expiration: recommended; on long expirations, CMF generates fairly accurate signals of market trends; it is worth combining Chaikin’s Cash Flow with the help of additional tools; Also here you can use your skills of fundamental and technical analysis of the market.
Expiration at the signal of crossing the zero mark
Short-term trading: not recommended; in turbo trading mode, CMF does not show clear signals, such trading will be unprofitable.
Medium-term expiration: recommended; on day expirations, CMF demonstrates accurate profitable signals of market trends; it is better to double-check the Chaikin Cash Flow data with additional tools.
Long-term expiration: recommended; on long expirations, CMF generates fairly accurate signals of market trends; professionals advise combining Chaikin’s Cash Flow with the help of additional tools; Also here you can use your skills of fundamental and technical analysis of the market.
Expiration when there is a signal of a discrepancy between the CMF and the price
Short-term trading: not recommended; in the express trading mode, CMF is not able to demonstrate clear signals, such trading will be unprofitable.
Medium-term expiration: recommended; it is safer to trade with CMF on such expirations; it shows strong divergence and convergence signals, which indicate a possible change in the market situation; in this case, double-check the Chaikin Cash Flow signals with additional tools.
Long-term expiration: recommended; trade with CMF reliably on long expirations; it shows strong divergence and convergence signals, which indicate a possible change in the market situation; in this case, double-check the Chaikin Cash Flow signals with additional tools, and here you can also use your skills in fundamental and technical analysis of the market.
Do you want to achieve more with binary options trading? Learn how to work correctly with expiration, and it will improve your productivity at times. In order to fully explore the possibilities of expiration, get acquainted with the popular broker Binomo, which offers expiration for trading from 30 seconds to 1 day. Right now, start testing expiration by going to the binomo.com website.
Downloads
MetaTrader 4 (MT4) platform – download.
CMF indicator for the MT4 platform – download.
Tagged with: Binary Options Indicator
