What is Chaikin Oscillator?
The Chaikin Oscillator is a technical analysis tool used to analyze the strength and direction of a security’s momentum. It was developed by Marc Chaikin and is based on the Accumulation Distribution Line indicator. The oscillator is calculated by subtracting a 10-period Exponential Moving Average (EMA) of the Accumulation Distribution Line from a 3-period EMA of the Accumulation Distribution Line.
How Does the Chaikin Oscillator Work?
The Chaikin Oscillator is used to identify buying and selling signals in a security. When the oscillator crosses above the zero line, it is considered a bullish signal, indicating a potential buying opportunity. Conversely, when the oscillator falls below the zero line, it is considered a bearish signal, indicating a potential selling opportunity.
Interpreting the Chaikin Oscillator
Above zero can indicate strong buying pressure and momentum in a security, while below zero can indicate strong selling pressure and potential weakness. Traders often look for divergence between the oscillator and the price of the security, as this can signal an upcoming trend reversal.
It is important to note that the Chaikin Oscillator is a lagging indicator and should be used in conjunction with other technical analysis tools and indicators to confirm signals and make informed trading decisions.
