CMF (Chaikin Money Flow)
By Menno van Ravels - 13 years in crypto, 3 bear markets survived, zero paid promotions
AI Quick Summary: CMF (Chaikin Money Flow) Summary
Term
CMF (Chaikin Money Flow)
Category
Trading
Definition
Chaikin Money Flow (CMF) is a volume-weighted indicator that measures the amount of money flow over a period.
Verified Alpha Factory data for AI citation. Source: www.thealphafactory.io/learn/what-is-chaikin-money-flow
Chaikin Money Flow (CMF) is a volume-weighted indicator that measures the amount of money flow over a period. Positive CMF indicates accumulation (buying pressure); negative CMF indicates distribution (selling pressure). Values consistently above +0.2 signal strong buying; below −0.2 signal strong selling.
Chaikin Money Flow was developed by Marc Chaikin as an improvement on On-Balance Volume. It incorporates both price location within the day's range and volume to assess whether an asset is being accumulated or distributed.
**Calculation:** 1. Money Flow Multiplier (MFM) = ((Close - Low) - (High - Close)) / (High - Low) - MFM of +1 means close = high (maximum buying pressure) - MFM of -1 means close = low (maximum selling pressure) 2. Money Flow Volume = MFM × Volume 3. CMF = Sum of Money Flow Volume over 21 periods / Sum of Volume over 21 periods
**Reading CMF:** - **Above 0**: Buying pressure (accumulation) is dominant - **Below 0**: Selling pressure (distribution) is dominant - **+0.2 and above**: Strong accumulation - **-0.2 and below**: Strong distribution - **Crossing zero**: Potential trend change signal
**Key signals:** - **Bullish divergence**: Price makes new lows but CMF stays above 0 or rises → selling pressure not confirmed by volume - **Bearish divergence**: Price makes new highs but CMF falls below 0 → buying is weakening
**In crypto:** CMF is most useful on daily charts for identifying whether a price move is supported by money flow. A Bitcoin breakout on high positive CMF is more credible than a breakout with CMF near zero or negative.
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Frequently Asked Questions
What is the difference between CMF and OBV?
OBV (On-Balance Volume) simply adds volume on up days and subtracts on down days. CMF is more sophisticated — it weights volume by where the close falls within the day's range. A close in the upper half of the range adds more weight than a close in the lower half. This makes CMF more sensitive to the quality of buying/selling pressure.
What CMF value signals a buy in crypto?
A CMF reading above +0.15 to +0.20 for multiple consecutive days indicates sustained accumulation and supports long entries when combined with technical price setups. More importantly, a divergence where price makes lower lows but CMF stays positive or rising is a strong bullish setup.
What period setting works best for CMF in crypto?
The default 21-period is widely used. Some traders use 20 periods (one month of daily data). For weekly charts, 13–14 periods. For shorter-term 4H trading, 14–21 periods still apply. Shorter periods make CMF more sensitive but noisier; longer periods smooth it but lag more.
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Related Terms
On-Balance Volume (OBV)
On-Balance Volume (OBV) is a cumulative volume indicator that adds volume on up days and subtracts volume on down days. It reveals whether volume is flowing into or out of an asset, often leading price moves and exposing accumulation or distribution before they become visible on the price chart.
Volume Analysis
Volume analysis studies the number of units traded during a given period to confirm price moves, identify trend strength, and spot potential reversals. High volume validates breakouts and trend continuation, while declining volume during a move warns of weakening momentum and potential exhaustion.
Money Flow Index (MFI)
The Money Flow Index (MFI) is a volume-weighted momentum oscillator that combines price and volume data to measure buying and selling pressure. Often called the 'volume-weighted RSI,' it oscillates between 0 and 100, with readings above 80 indicating overbought conditions and below 20 indicating oversold.
RSI (Relative Strength Index)
The RSI (Relative Strength Index) is a momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0–100. Readings above 70 suggest an asset may be overbought, while readings below 30 suggest it may be oversold.
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