Chaikin Volume Indicator Strategy EURUSD 1HThe reason why Chaikin Money Flow is the best volume indicator and it’s better than the classical volume indicator is because it measures institutional accumulation-distribution.
Typically on a rally the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs the Chaikin volume indicator should be below the zero line.
Step #1: Chaikin Volume Indicator must shoot up in a straight line from above zero (minimum +0.15) to below the zero line (minimum -0.15)
When the Volume goes from positive to negative in a strong fashion way it has the potential to signal strong institutional selling power. That’s our base heavy lifting signal!
Basically, we let the market to reveal its intentions.
When the big money steps into the market, they leave a mark as their orders are so big that it’s impossible to hide. When the volume indicator forex goes straight from above zero to below the zero line and beyond it shows accumulation by smart money.
We’re firm believer that you get your maximum bang for the buck when you trade side by side with the smart money. The institutions have more money than you have, more resources than you have and probably they are smarter than you. It’s pretty obvious that the odds are stacked against you, so if you want to change that just follow the smart money.
Step #2: Wait for the Volume Indicator Forex to slowly pullback above the zero line. The price needs to remain below the previous swing high.
Once we spotted the big elephant in the room aka the institutional players we start to look for the first sign of market weakness. Here is how to identify the right swing to boost your profit.
We’re going to let the Chaikin Money Flow indicator slowly move above the zero line. The key word here is “slowly”. We don’t want to see the volume dropping fast because this will invalidate the accumulation noted previously.
Secondly, as the volume decreases and moves above the zero line, we want to make sure the price remains below the previous swing high. This will confirm the smart money accumulation.
Step #3: Sell once the Chaikin Forex indicator breaks back below the zero line. Wait for the candle close before pulling the trigger.
Now that we have observed real institutional money coming into the market, we wait for them to step back in and drive the market back down.
When the Chaikin indicator breaks back below the zero line, it signals an imminent rally as the smart money are trying to selloff the price again.
Obviously that we would need to wait for the candle close to confirm the Chaikin break below the zero line. Once everything aligns together we’re free to open our short position.
Note* The trigger candle needs to have the closing price in the upper 25%.
Step #4: Hide your protective Stop Loss above the previous pullback’s high.
Using a stop loss is crucial if you want to have an idea of how much you’re about to lose on your trade. Never underestimate the power of placing a stop loss as it can be lifesaving.
Simply hide your protective stop loss above the previous pullback’s high. Never use a mental stop loss and always commit a SL right at the moment you open your trades.
Trading with a tight stop loss can give you the opportunity to not just have a better risk to reward ratio but also to trade bigger lot size.
Step #5: You choose your Take profit or Take profit when the Chaikin Volume moves above +0.15
Once the Chaikin volume moves back above +0.15 it indicates that the buyers are stepping in and we want to take profits. We don’t want to risk giving back some of the profits gained so we liquidate our position at the first sign of the smart money stepping in on the other side of the market.
We always can get back into the market later if the smart money show up again.
Note** the above was an example of a SELL trade using the best volume indicator. Use the same rules for a BUY trade – but in reverse.
