As mentioned in the previous post the Chaikin Money Flow indicator measures the buying and selling pressure for a certain calculation period, therefore, its technical functionality allows confirming the direction of the trend.
Consequently, when the Chaikin Money Flow indicator develops movements above zero (0) towards the positive zone, it indicates that the buying pressure exceeds the selling pressure, and in the opposite case, when it generates movements below zero (0) towards the negative zone, it serves as a guide to associate that the selling pressure is greater than the buying pressure.
Exit point of sale
If in a given market we observe an uptrend, and then we observe that the positive values of the Chaikin Money Flow indicator begin to decrease towards the zero (0) line and cross with negative values, it is a sign of weakness of the trend and an opportunity to sell.
In the chart above, you can see the exit signal and sell point in the ADA/USDT pair above $2.58.
Point of purchase entry
In the opposite case, if in a given market we observe a downtrend, and then we observe that the negative values of the Chaikin Money Flow indicator begin to rise towards the zero (0) line and cross with positive values, it is a sign of weakness of the trend and an opportunity to buy.
See the above chart for an entry signal and buy point on the ZIL/USDT pair near $0.079.
I hope that the information shared will serve as a kind of simple guide to learn how to use the Chaikin Money Flow, since knowing its basic principles will allow us to combine it with different indicators to create more effective trading strategies and therefore allow us to cut losses. In the next post I will continue to expand on some technical approaches to the Chaikin Money Flow indicator.
SOURCES CONSULTED
Tradingsim Chaikin Money Flow Indicator Review. Link
OBSERVATION:
The cover image was designed by the author: @lupafilotaxia, incorporating image: Binance
