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Chaikin Oscillator, also known as Chaikin Accumulation/Distribution (A/D) Oscillator, is a lesser known but effective indicator to analyze money flow, to confirm trends and to predict trend changes. The indicator was created by Marc Chaikin and hence the name. Simply, Chaikin oscillator is the Moving Average Convergence Divergence (MACD) applied to Accumulation Distribution line. Know more about Accumulation/Distribution indicator.

Chaikin oscillator is calculated by subtracting 10-day Exponential Moving Average (EMA) from 3-day EMA of the Accumulation/Distribution line. Chaikin oscillator works on some assumptions as

1. The buying/selling pressure can be determined by the location of close.
2. Lack of trading volume in an uptrend/downtrend indicates the weakening of the trend.
3. Divergence between price and volume can indicate a possible reversal.

With Chaikin oscillator bullish signals are generated when there is a positive divergence (in price and volume) and/or at bullish centerline crossover (from below). Bearish signals are generated when there is a negative divergence and/or bearish centerline crossover (from above). As Chaikin oscillator is an indicator of an indicator, confirmation of divergences should be confirmed. Other volume and trend indicators should be used in conjunction with Chaikin oscillator; Marc Chaikin suggested to use 21-day price envelop and an overbought/oversold indicators like RSI.

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