Chaikin Oscillator was invented by and named after its creator, Marc Chaikin. The origin was an indicator of accumulation / distribution of well-known traders and Larry Williams and Joe Granville.
As we already know that the basis of the indicator accumulation / distribution is that the great strength of sellers or buyers can be determined by the relative price of a closed period. If the closing price was closer to the upper trading range, it was considered that the market traders have the advantage, and if the closing price of the asset was closer to the lower trading range, it was considered that the market for more buyers.
The indicator is calculated:
Chaikin indicator is the difference When the Accumulation / Distribution with different periods.
Decoding the formula for calculating (located in the photo)
CH - indicator "Chaikin Oscillator"
EMA - Exponential Moving Average
A / D; 3 - indicator value accumulation / distribution with a specified period of 3
A / D; 10 - the indicator value is the accumulation / distribution with a specified period of 10
Description of the indicator:
This indicator is a simple "convergence - divergence of moving averages" as an indicator MACD, only used to display the accumulation / distribution. It is calculated as the difference between the 3-day exponential moving average and 10-day exponential moving average of the indicator of the accumulation / distribution.
As predicted by the MACD moving average, and predicts further Chaikin Oscillator indicator movement of accumulation / distribution.
Chaikin oscillator behavior analysis relies on a number of principles that need to have to know when using the indicator:
1. If the closing price for the period, for example, three days before the middle of the trading range, it means that most of the investors at the moment, buy, and there is a "build" on the asset. The higher the price is close to the maximum of the trading range, the more "buildup. So with the price, which is below the middle of the trading range, but there is a "distribution" for the asset.
2. The trend in the forex market is always accompanied by increased volumes, so when the growth chart does not match the volume, this means that the trend is no longer valid, and soon it will start opposite movement.
The use of the indicator "Chaikin Oscillator":
In Chaikin oscillator has two types of basic signals - is the divergence and crossing the center line.
Buy signals. Bearish divergence occurs when the price chart a new low below the previous and the new low in the display above the previous. The strongest divergence, when the market has oversold (calculate other indicators). Strong signal is the indicator turns upward in the negative, when the market has a rising trend (trend calculated by other indicators).
Sell signals. Bullish divergence occurs when the price chart a new high above the previous one, and a new high in the display below the previous one, and the market has oversold. Just when the indicator shows a turn downward in the positive area, in a downtrend, it generates a sell signal.
Results and weaknesses indicators:
Using a stand-alone indicator, this is a useless move, because the indicator must always be based on data for other indicators. Chaikin Oscillator indicator works well with the "Bollinger Bands", and with indicators that show overbought and oversold in the market (such as it is RSI , CCI , Stochastic). All the above indicators, which help the Chaikin Oscillator, you can read on our site.
The lack of an indicator, it is a short moving average (compared with MACD). As a result, he was very sensitive to changes and can give false signals on the charts small half.