Chaikin A/D Oscillator

Summary

The Chaikin Oscillator is the continuation of the Chaikin A/D Line and is used to observe changes in the A/D Line.

The oscillator is based on the difference between the 3-day Exponential Moving Average (EMA) of the A/D Line and the 10-day EMA of the A/D Line and hence adds momentum to the A/D Line. It is helpful for investors to use the Oscillator in order to determine the appropriate timing of trend reversals.

Calculation

Chaikin Oscillator = (3 day EMA of A/D Line) - (10 day EMA of A/D Line)

where,

A/D Line = Previous A/D Line + Current's Period Money Flow Volume

Money Flow Volume = Volume of current period x Money Flow Multiplier

Money Flow Multiplier = (Closing price - Low) - (High - Closing price)
(High - Low)

Chaikin Oscillator is positive when the 3-day EMA moves higher than the 10-day EMA and vice versa.

Signals

When the Chaikin Oscillator turns positive there is indication that the A/D Line will increase and hence a Bullish (buy) signal will be generated. On the other hand a move into negative territory indicates a Bearish (sell) signal.