Chaikin Oscillator

In this article, We learn about "Chaikin Oscillator ".Let's Go!

Chaikin Oscillator was developed by Marc Chaikin and is used to compare the volume and price levels of an asset. Oscillators can be used to indicate when an asset is overbought or oversold, thereby signaling an impending reversal.

To calculate a Chaikin Oscillator chart, a trader first generates an asset's accumulation/distribution line (A/D line). The A/D line is derived from an index called the Closing Value (CLV), which compares the highest, lowest and closing prices. If the closing price is above the midpoint of the high-low range, CLV will be positive; if the closing price is below the midpoint, CLV will be negative. The cumulative sum of CLV multiplied by the asset's volume generates the A/D line, which is higher when the closing price and volume are higher and lower when the closing price and volume are low, indicating that the asset is on either side There is pressure upwards. The Chaikin Oscillator is simply the ten-period moving average of the asset price minus the three-day moving average of the newly generated A/D line value.

When the oscillator is at a high value, the A/D line is at a low value relative to the asset price, indicating that selling pressure on the asset is increasing and a price reversal is imminent. Conversely, when oscillators are at lower values, buying pressure increases and a price increase is equally imminent. Therefore, investors can use oscillators to help determine the appropriate time to sell or buy an asset in order to take advantage of (or avoid getting caught in) an impending reversal.

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