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taking 100 TRADES with Chaikin Money Flow Trading Strategy - Is this the BEST indicator for... - YouTube
Channel: TRADING RUSH
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Does Chaikin money flow indicator work? What's
the win rate of the Chaikin money flow indicator
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strategy? Will it perform as good as some
of the other trading strategies we have tested
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100 times or even better? Well, why don't
we test the Chaikin money flow trading strategy
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100 times and find out.
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We test many different trading strategies
100 times to see if they actually聽work or
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not.聽If you are watching the Trading Rush
channel for the first time, don't forget to
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subscribe and ring that notification bell,
after all you don't want to trade with a not
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good strategy.
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If you plot the Chaikin money flow or CMF
on trading view, you will notice that it comes
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with one line that oscillates between positive
one and negative one. Chaikin money flow is
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used to find the direction of a trend and
the buying and selling聽pressure.
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It was created by聽Marc聽Chaikin who is a
stock trader and has created many other indicators,
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one of them is the聽Accumulation Distribution.
Since chaikin money uses volume to calculate
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its values, it will work better on the stock
market where volume is more readable.
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When the Chaikin money flow is below the zero
line, it indicates a down trend or a selling
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pressure, and when the Chaikin money flow
is above the zero line, it means there is
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a buying pressure.
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So here's how the Chaikin money flow trading
strategy聽works.
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When the Chaikin money flow line crosses above
the zero line, it's a buy signal.
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Similarly, when the Chaikin money flow line
crosses below the zero line, it's a sell signal.
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Also, it is a good idea to use it with a 200
period moving average to find the end of a
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pullback in a trend.
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So here's how the complete chaikin money flow
trading strategy goes.
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Buy when the Chaikin money flow line crosses
above the zero line if price is above the
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200 period moving average. Price above the
200 period moving average indicates an uptrend.
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Set the stop loss below the pullback.
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And sell when the Chaikin money flow line
crosses below the zero line if price is below
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the 200 period moving average. Price below
the 200 period moving average indicates a
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down trend. Your stop loss goes above the
pullback.
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Here, price is above the 200 period moving
average, and the CMF is crossing above the
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zero line. Your entry is at the closing price
of the first candle that closes above the
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zero line.
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And here, price is below the 200 moving average,
and the CMF is crossing below the zero line.
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The entry is at the closing price of the first
candle that crosses below the zero line.
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Now anyone can show few winning trades, but
will the Chaikin money flow work in the long
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run. Can you make money with it? To find out,
I tested the Chaikin money flow trading strategy
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100 times, and here's what happened.
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Number 1. At the beginning, Chaikin money
flow trading strategy gave a lot of winning
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trades in a row. If you look at the profit
graph in the Trading Rush App, you will notice
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that it is going straight up. I have tested
many different trading strategies on the Trading
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Rush channel, and only few indicators like
the MACD and Donchian Channels, have given
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similar numbers of winning trades at the start.
Now since the Chaikin money flow is giving
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multiple winning trades in a row, does this
mean the Chaikin money flow is as good as
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the MACD strategy? Well, when I was backtesting
this strategy, I noticed that it gives a lot
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of entry signals in a short period of time.
At the start when the price was trending,
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the Chaikin money flow indicator gave a lot
of winning trades in a row. But when the market
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went sideways, it gave multiple false signals
in a row. This problem can be easily fixed
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by using the alligator indicator. Usually,聽when
the mouth of the alligator is closed, it means
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that the trend is moving sideways. I have
made a detailed video on the alligator indicator,
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check it out to learn more. Also, check out
Official Trading Rush App, it has a backtester
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feature that you can use while backtesting
your trading strategy. It will calculate win
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rate, profit graph and other data in just
one click. Download it from the play store
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or using the link in the description.聽
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Number 2. Chaikin money flow strategy gives
many entry signals in a short period of time,
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and those are not always at the end of a pullback.
Sometimes, the Chaikin money flow indicator
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gives entry signals even when the market is
strongly moving in almost a straight line.
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Because of this, setting a stop loss above
or below the pullback becomes difficult. So
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it is a good idea to use other stop loss聽indicators
like the ATR or聽parabolic sar聽with this
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indicator. Here, we are using the Chaikin
money flow indicator to find entry signals,
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but you can also use it as an exit signal
generator. Lets say you enter a long trade
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with the MACD strategy. You can exit the trade
when the Chaikin Money Flow crosses below
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the zero line.
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Number 3. As you can see in the Trading Rush
app, the profit graph went up at the start
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and gave multiple winning trades in a row,
but then went down and gave multiple losing
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trades in a row. Profit and losses are not
consistent with this strategy. But this strategy
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has a big room for improvement,聽because most
of the losing trades it gave were in the range
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market. If you can identify the range market,
the win rate of this strategy will significantly
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go up. Alligator indicator will get the job
done as mentioned before.
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Number 4. While backtesting, I noticed that
when聽Chaikin gives a false short entry signal,
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in other words when the price is moving down
in almost a straight line and there is no
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proper聽pullback to set the stop loss, the
Chaikin money flow聽barely crosses above the
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zero line. Similar thing applies to the false
buy setups. So聽you聽can improve the win rate
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of the Chaikin money flow indicator strategy,
and get a better stop loss target distance,
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by only taking long聽trades when the CMF line
goes way below the zero line, and by only
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taking short trades when the CMF line goes
way above the zero line.聽If you are a stock
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trader, just remember that this indicator
doesn't take gap opens into consideration.
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So manage trades accordingly because the CMF
value sometimes won't be accurate after a
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gap open.
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So after testing the Chaikin money trading
strategy 100 times, I found out that the win
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rate of the Chaikin money flow strategy is
not that good, but has a lot of room for improvement.
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I got a win rate of approximately聽43 percent
with a 1.5 to 1 reward risk ratio and聽in
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the Trading Rush App, you can see that it
made a profit, but the profit graph doesn't
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look that good. In other words, the profits
don't look that consistent when compared with
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other trading strategies we have tested on
this channel. It gave聽10 winning trades in
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a row, but then lost 9 trades in a row. Overall,
Chaikin money flow is a great indicator if
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you just want to analyze the strength of the
trend and the direction of the trend. When
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it comes to entry signals, it gives a lot
of false entry signals. But if you have an
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eye for correctly spotting the range markets,
this indicator can work excellently in the
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strong trends.
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That's all. Like the video if you liked it.
Don't forget to subscribe and ring that notification
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bell to see more trading strategies tested
100 times, after all you don't want to use
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a not good strategy. Maybe Support the Trading
Rush channel on Patreon and see my trades
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and in-depth analysis. And thanks to the wonderful
Patrons for supporting the Trading Rush channel
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on Patreon. Thanks to everyone for watching.
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