Cash flow management strategy

Description

Many of us are in constant search of additional income and this will not surprise anyone.
Everyone is thinking about financial independence and looking for ways to earn extra money. Remote work online is the most comfortable way to get additional capital. Most often, they offer easy money, but the payment for labor is usually questionable. It’s not for nothing that binary options trading has become popular so quickly and continues to gain momentum, allowing you to turn from additional income into your main one. Trading is completely legal, brokers fulfill all obligations to market players, and you can receive your first money in 30 seconds.

First of all, it is reliable, promising, and those who understand this think through their strategy for profitable trading, test robots and trading systems, search for profitable signals, study new indicators, monitor promotions and bonuses, and broker ratings. You will find all this data and even more useful information on our resource. Our review today is dedicated to the Chaikin Money Flow indicator.

Chaikin Money Flow (CMF) is a popular binary options trend indicator that quickly and accurately determines the movement of trends in the market at the moment. The author of the tool is the famous trader Mark Chaikin (who created the popular CHO and CHV), who introduced it to the public back in 1966. And although a lot of time has passed, to this day CMF is considered one of the most profitable in trading.

In order to be a successful trader, it is important to monitor market dynamics, see the stages of trend changes and be able to use it. One of the most effective tools that allows you to earn a lot of money is CMF.

Working in the market, M. Chaikin focuses specifically on the volume indicator; according to his theory, powerful trends are always reflected in volume dynamics: if an asset becomes more expensive, buyer actions are more aggressive, volumes increase; if the trend remains in the same state, and large market players sell assets, this indicates a reversal; volumes begin to outstrip the price.

You can learn more about the capabilities of CMF in the MetaTrader 4 terminal in the image below. You can also easily get acquainted with its operating features in practice.

What is the operating principle of the CMF indicator?

To work successfully in the market, it is important for a trader to know about market sentiment and work with proven tools. One of the most accurate trend indicators is the Chaikin Money Flow. Like A/D, it is based on the accumulation and distribution of trading volume, providing leading evidence of a rising or falling trend.

CMF should not be confused with Money Flow Index; it is Cash Flow that is considered the most informative and effective. On the chart it is located in a separate window, in the form of a curve taking values from 1 to -1. The main principle of its operation lies in its connection with the distribution line, which determines the strength of the trend movement based on the closing points:

if a specific closing level is located at recent market highs, this is an upward movement,
if the price chart moves to the lows, this indicates a downward trend.

This is an excellent profitable tool that allows you to simultaneously work with the price indicator, comparing it with market volume.

Indicator calculation formula:

Sum ((((CL) - (H-C)) / (HL)) * V) / sum (V), where:

C — closing price; L—minimum; N - maximum; V - volume (period 21).

Information taken from the website biznes-institut.ru

Indicator signals

Trend signals

if a specific closing level is located at recent market highs - this is an upward movement, you can buy CALL options ,
if the price chart moves to the lows, this indicates a downward trend, it is worth purchasing PUT options .

Zero crossing signals

If the CMF line is above the zero line, you can buy CALL options .
If the CMF line is below the zero line, it is worth purchasing PUT options .

Signals of CMF divergence from price

A divergence situation occurs during an upward trend: when price highs are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying CALL options .
A convergence situation occurs on a downward trend: when price lows are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying PUT options .

Do you need to install the CMF indicator on your platform?

CMF is a non-standard stock exchange trading indicator; it is not included in the basic list of MetaTrader 4 platform tools. To work with it, download it for free here. Next, install the file in MT4 by following the simple instructions here.

After installing CMF, all that remains is to add it to the price chart, to do this:

Click the "Insert" tab in the top menu of the platform
Select the “Custom” tab - “CMF”.

When you add a tool, a window of available settings will automatically open in front of you:

Visual settings
Period (optimal value – 21).

How to interpret the CMF indicator

The understanding of the Chaikin Money Flow indicator is based on the theory that a generally robust market is often accompanied by prices closing in the upper half of its daily high/low range on elevated volumes.

While a weak market is often accompanied by prices closing in the lower half of their daily range and on increased volumes.

Therefore, if price consistently closes in the upper half of its daily range with increasing volume, the CMF indicator will read above zero - positive CMF, indicating a strong market.

Conversely, if price consistently closes in the lower half of its daily range with increasing volume, the CMF indicator will read below zero - negative CMF, indicating a weak market.

(Note: The zones are colored for illustration purposes only. The indicator is not actually colored. The CMF_T3 version of the indicator can display the indicator as a histogram, which can be included in the settings).

Using the indicator for binary options

Chaikin Money Flow is one of the popular trending tools, which, if used correctly, provides the opportunity to make decent money, showing quite accurately who is currently leading the market: bulls or bears. The indicator line is constantly located at the zero mark, which is a simple way to identify signals:

If its line is above the zero line, you can buy CALL options,
If the line is below the zero line, it is worth purchasing PUT options.

In this case, it is worth considering the fact how long the instrument is located in a specific area (negative or positive). The longer the indicator is located in one of these areas, the stronger the signal to buy the option.

Today, traders use the tool quite widely; it is most common in determining the market trend. Also, CMF is able to most accurately show divergences from the price line (divergence and convergence). When market dynamics of volumes contradict the movement of quotes, this indicates that money is growing in the opposite direction and a change in trend is expected.

As a reliable tool, Chaikin Money Flow is capable of generating simple but profitable signals, showing the best results unlike other volume tools. It works best on daily charts (days and even weeks); on smaller timeframes the signal deteriorates. It is recommended to combine it with other instruments (for example, RSI, Stochastic, CCI, etc.).

Rules for concluding transactions (screenshots)

Trading with a trend signal

If a specific closing level is located at recent market highs - this is an upward movement, you can buy CALL options. In the image below you can observe an upward trend in the MT4 terminal:

Place a CALL bet with the Binomo broker by going to binomo.com, prepare an option for trading, indicating:

Option
Expiration
Amount
Forecast: up
Next, click the “buy” button and expect the results:

If the price chart moves to the lows, this indicates a downward trend, it is worth purchasing PUT options. In the image below you can observe a downward trend in the MT4 terminal:

Place a PUT bet with the Binomo broker by going to binomo.com, prepare an option for trading, indicating:

Option
Expiration
Amount
Forecast: down
Next, click the “buy” button and expect the results:

Trading on a zero crossing signal

If the CMF is above the zero line, you can buy call options. In the image below you can observe an upward trend in the MT4 terminal (place a CALL bet on binomo.com, instructions are presented above):

If the CMF line is below the zero line, it is worth purchasing PUT options. In the image below you can observe a downward trend in the MT4 terminal (place a PUT bet on binomo.com, instructions are presented above):

Trading when the CMF signal diverges from the price

A divergence signal occurs on an upward trend: when price highs are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying CALL options . In the image below you can observe the divergence in the MT4 terminal (place a CALL bet on binomo.com, instructions are presented above):

A convergence signal occurs on a downward trend: when price lows are not confirmed by the CMF, this indicates a possible change in the market situation, it is worth buying PUT options . In the image below you can observe the convergence in the MT4 terminal (place a PUT bet on binomo.com, instructions are presented above):

Cash flow - Chaikin indicator

Chaikin cash flow is a trending instrument. Chaikin Money Flow can be used independently or in conjunction with other binary options indicators for greater signal reliability.

BASIC OPERATING PRINCIPLES

In some cases, a trader needs to be aware of the current market sentiment. When determining market sentiment, traders can use a variety of binary options indicators. This indicator can easily be classified as such a toolkit. It is important to note that Chaikin Cash Flow is quite complex to operate, but after becoming familiar with the principle of its operation, it is possible to significantly increase the possibilities for achieving positive results.

The main principle of operation of the Chaikin Money Flow is the reliability of the connection with the values of distribution lines showing the strength of the trend in the market. It is based on the degree of closure. For example, if the closing point is close to the maximum level, the trader assumes the dominance of the bulls in the market. The situation is completely different if the closing levels are close to the minimum range of extremes. In this case, the undisputed leadership in the market is occupied by bears.

The line of accumulation or distribution performs work according to a similar principle. Chaikin Money Flow indicator is quite easy: it requires knowledge of some values for the accumulation or distribution line. After determining the Chaikin cash flow of these values, further calculations are carried out. In total, the values of the accumulation line for a specific period of time are divided by the entire volume of ongoing trading for the same period of time. The time period in this case, using Chaikin Cash Flow, is 21 days. It can be assumed that this segment will be the optimal value for the operation of the Chaikin Cash Flow .

In this case, the trader can independently determine the size of the calculation periods according to his desires or in connection with the strategy used for binary options. In addition, periods are allowed to be shifted in time, then it is necessary to remove a certain number of previously passed days and add the same number of following ones. Immediately after the changes, the Chaikin Cash Flow calculates again. It is precisely in accordance with this principle that work is performed by Chaikin Cash Flow .

APPLICATION OF CHAIKIN MONEY FLOW IN TRADE BUSINESS

Chaikin Money Flow indicator, you can see fluctuations in all its values around the zero division. It is for this reason that traders’ reaction to changes in its values is as follows: when the curve is above the zero division mark, they decide to buy a Call contract; if the readings are different, they buy a lot with the Put direction. This refers to the simplest way to use the Chaikin Money Flow . At the same time, there are a number of features that require additional attention from the trader when using this auxiliary tool.

For example, it is important to periodically study the absolute indicators of Cash Flow and the timing of these indicators within a specific area (namely, the timing of its stay, for example, in the zone above the zero mark or below this mark). In practical application, there are situations when the Cash Flow Chaikin has been above zero for a long time. And it is gradually increasing. This is a rather powerful signal for the continuation of the upward trend. In such a situation, a trader should pay attention to buying a Call option. When the Chaikin Money Flow is below the zero mark and gradually decreases in the future, we can speak of a powerful bearish signal. In this case, the trader should choose to buy a Put contract.

Money management

Money management is one of the main market tools that determine the success of trading, as well as allowing you to achieve the best performance in trading. Beginners to options, as well as those who have decided to make a stable profit from trading, should get acquainted with it as early as possible.

Minimum capital : when working with options on the stock exchange, we recommend betting the minimum of your capital on the purchase of a specific asset; in this case, the price of the asset should not be more than 5% of the account size; participate in trading low-cost options, the purchase of which will not affect the size of the deposit in case of losses. By mastering trading using these simple rules, you can save your capital as much as possible.

Minimum deposit : when working with options on the exchange, we recommend participating in transactions that can easily support your deposit; when purchasing a specific asset, you should not transfer your entire account to it; on the contrary, work with your account so that it lasts for a long time, giving you the opportunity to earn more. By mastering trading using these simple rules, you will be able to save and increase your deposit.

Minimum options : when working with options on the exchange, we recommend purchasing a minimum of assets, for example, 2 or 3; This rule applies to exchange newcomers who do not yet have trading experience; As soon as you become more experienced, calmly increase the number of transactions. By mastering trading using these simple rules, you can achieve good trading results.

Minimum of emotions : when working with options on the stock exchange, we recommend having the right attitude; remember that successful trading is the clarity and balance of your decisions; Don't let your emotions get the better of you, because... they can work against you and your results. By mastering trading using these simple rules, you can become a successful trader.

Expiration

Expiration (from English Expiration, “end”) is the moment of completion of trading in a specific asset, it is then that all exchange participants set forecasts and learn about their performance. Expiration is also a concept without conscious use of which it is difficult to achieve the maximum from trading.

Expiration in strategies with CMF

Expiration on a trend

Short-term trading : not recommended; although CMF is capable of generating accurate market trend signals; in this case, professionals recommend avoiding trading due to the increased risks of transactions. Medium-term expiration : recommended; on daily and weekly expirations, CMF generates accurate profitable market trend signals; professionals advise combining Chaikin Cash Flow with additional tools. Long-term expiration : recommended; on long expirations, CMF generates fairly accurate market trend signals; it is worth combining Chaikin Cash Flow using additional tools; Also here you can use your skills in fundamental and technical market analysis.

Expiration on zero crossing signal

Short-term trading : not recommended; in turbo trading mode, CMF does not show clear signals, such trading will be unprofitable. Medium-term expiration : recommended; on daily expirations, CMF demonstrates accurate profitable signals of market trends; It’s better to double-check Chaikin’s Cash Flow data with additional tools. Long-term expiration : recommended; on long expirations, CMF generates fairly accurate market trend signals; professionals advise combining Chaikin Cash Flow using additional tools; Also here you can use your skills in fundamental and technical market analysis.

Expiration when the CMF diverges from the price signal

Short-term trading : not recommended; in express trading mode, CMF is not able to demonstrate clear signals; such trading will be unprofitable. Medium-term expiration : recommended; at such expirations it is more reliable to trade with CMF; it shows strong signals of divergence and convergence, which indicate a possible change in the market situation; in this case, double-check the Chaikin Money Flow signals with additional tools. Long-term expiration : recommended; It is safe to trade with CMF on long expirations; it shows strong signals of divergence and convergence, which indicate a possible change in the market situation; in this case, double-check the Chaikin Money Flow signals with additional tools, and here you can also use your skills in fundamental and technical market analysis.

Do you want to achieve more with binary options trading? Learn to work with expiration correctly, and it will improve your performance exponentially. In order to fully explore the possibilities of expiration, get acquainted with the popular broker Binomo, which offers expiration for trading from 30 seconds to 1 day. Start testing expiration right now by going to binomo.com.