What is the Chaikin Money Flow? Definition, Formula, and Example
Chaikin Money Flow is a volume-weighted oscillator developed by Marc Chaikin that sums money-flow volume over a 20-bar window and divides by total volume, producing a value between -1 and +1 that quantifies sustained buying or selling pressure.
Plain-English Definition
Chaikin Money Flow (CMF) is a volume-weighted momentum oscillator built by Marc Chaikin, a former NYSE specialist and founder of Chaikin Analytics. It measures whether a stock has been accumulated or distributed over the look-back period — by default 20 bars — by combining where each bar closed within its range with the volume that traded on that bar. CMF oscillates between -1 and +1: positive values indicate net buying pressure, negative values indicate net selling pressure.
How It's Calculated
CMF requires three steps:
Step 1 — Money Flow Multiplier (MFM):
MFM = ((Close − Low) − (High − Close)) / (High − Low)Range: -1 (close at low) to +1 (close at high). A close at midpoint = 0.
Step 2 — Money Flow Volume (MFV):
MFV = MFM × VolumeStep 3 — CMF over n bars (default n = 20):
CMF = Σ MFV(n) / Σ Volume(n)Interpretation thresholds in common use:
- CMF > 0.25 → strong accumulation
- 0 to 0.25 → mild buying
- -0.25 to 0 → mild selling
- CMF < -0.25 → strong distribution
Worked Example
NVDA on a single bar:
- High: $920, Low: $880, Close: $915, Volume: 48M
- MFM = (($915 − $880) − ($920 − $915)) / ($920 − $880) = ($35 − $5) / $40 = +0.75
- MFV = 0.75 × 48M = +36M
That bar contributes +36M to the 20-bar numerator and 48M to the denominator. A 20-bar window of similar bars would push CMF toward +0.75.
Real readings: NVDA's 20-bar CMF averaged +0.28 from January through March 2024 during its post-earnings rip from $480 to $950 — a textbook strong-accumulation signature confirmed by unusual options activity and 13F filings.
When Traders Use It
- Trend confirmation. Price uptrend with CMF > 0.10 = institutional support; uptrend with CMF < 0 = a warning that the rally is short-covering, not accumulation.
- Divergence trading. Price prints a higher high while CMF prints a lower high → bearish divergence. The May 2021 AMC peak showed exactly this — price at $72 with CMF rolling from +0.35 to +0.05.
- Breakout filtering. Range breakouts with CMF > 0.20 have measurably higher follow-through rates than breakouts with CMF near zero.
- Sector scanning. CMF screens isolate names where volume is voting the same direction as price across sectors.
Limitations and Common Misconceptions
- Gap-blind. The Money Flow Multiplier uses each bar's own high, low, and close — it doesn't see the gap between yesterday's close and today's open. On gap-heavy names like TSLA earnings reactions, CMF can mislead.
- Doesn't equal "money flowing into the stock." Every share sold has a buyer — the dollar flow is zero by definition. CMF is a *price-location-weighted volume* statistic, not a literal capital-flow measurement.
- Low-float distortion. A few large prints on illiquid names can flip CMF.
- Slow at turning points. With a 20-bar window, CMF lags by roughly 10 bars at trend reversals.