Chaikin Oscillator was brought into inception by Marc Chaikin in order to measure the momentum of the accumulation distribution line by making use of MACD formula. Unlike other momentum indicators, this Chaikin Indicator is mainly designed to anticipate the directional changes by measuring the momentum behind its movements. The difference in the momentum is the first step in the trend change and anticipating the trend changes within the accumulation distribution line surely help for the underlying security. This oscillator generates signals along with crosses above as well as below zero lines with the presence of either bearish or bullish divergences.
Initially, it is pretty much important to bear in mind that Chaikin oscillator is nothing but an indicator of the indicator. It is used to measure the accumulation distribution momentum line. This makes it possible in three different steps. First one is, volume and cost are reshaped into accumulation distribution line; the second one is, the exponential moving average is readily applied to accumulation distribution line; the third one is the difference between moving averages.
Bearish and Bullish divergences alert chartists to the momentum shift either in selling or buying pressure which can easily foreshadow the trend reversal; whereas bullish divergence forms when the cost moves towards new loans, and this specific oscillator forms a much higher low. At the same times, it’s equally essential to get some sort of confirmation like the upturn in its indicator and other such things.
The Bottom line
It is a momentum indicator used for accumulation distribution line. Basically, this oscillator charges accumulation distribution line through measuring the momentum. Even the signals are more frequent, and thus it becomes often much easier to quantify the process by using Chaikin oscillator. Unlike other types of oscillators, this oscillator shouldn’t be utilized as the stand-alone indicator.