CMF: Chaikin Money Flow Explained

Marc Chaikin's Chaikin Money Flow (CMF) reads intent from where the bar closes. A close near the high means buyers controlled the session; near the low, sellers did. Weight that by volume, average it over the period (default 20), and you get a −1 to +1 oscillator of pure buying-versus-selling pressure.

How CMF Works

• CMF above 0: closes are landing in the upper part of their ranges on meaningful volume — accumulation.
• CMF below 0: distribution.
• Sustained readings beyond ±0.25: strong, one-sided pressure.

The nuance that makes CMF special: price can rise while CMF is negative — rallies that keep closing weakly on volume. Those are the rallies that fail.

How to Trade It

1. Zero-line gate. Only take longs while CMF > 0. This one-condition filter keeps breakout bots out of volume-less traps.

2. Pressure divergence. New price high with a falling CMF = each push is closing weaker; tighten stops.

3. Threshold entries. CMF crossing above +0.1 after a base marks the start of committed buying; below −0.1, committed selling.

Building It in Setup.Cash

Add CMF in the strategy builder (volume required) and condition on zero or threshold crossings. It slots naturally as confirmation for Support/Resistance zone breaks or Donchian breakouts: structure says where, CMF says whether the money agrees.

Tuning

• 20: standard.
• 21 weekly-ish rhythm on dailies is common in stocks.
• Shorter (10): faster but jumpier — pair with stricter thresholds.

CMF vs Its Cousins

• OBV: cumulative, unbounded, all about divergence shape.
• MFI: RSI-style 0–100 with overbought/oversold bands.
• CMF: bounded around zero — the cleanest filter of the three. The extended library adds the Chaikin A/D Oscillator, Elder Force Index, and Ease of Movement for further variations.

Backtest the zero-line gate on your existing strategy — it's one line of logic and often pays for itself.