The Chaikin Oscillator Indicator is a technical analysis tool used to measure the momentum of buying and selling pressure in the market. In this article, we will discuss the definition, working, and best settings of the Chaikin Oscillator Indicator for MT5, and how to use it to trade in the forex market.
Definition
The Chaikin Oscillator Indicator is a momentum indicator that was developed by Marc Chaikin. It is used to measure the momentum of buying and selling pressure in the market, by calculating the difference between two moving averages of the Accumulation Distribution Line.
Working of Chaikin Oscillator Indicator in MT5
The Chaikin Oscillator Indicator for MT5 works by calculating the difference between two moving averages of the Accumulation Distribution Line. The indicator is based on the premise that volume precedes price, and that price movements are driven by buying and selling pressure in the market.
The calculation of the Chaikin Oscillator Indicator is based on the following formula:
CO = (3-day EMA of ADL) – (10-day EMA of ADL)
Where:
- CO is the value of the Chaikin Oscillator Indicator
- ADL is the Accumulation Distribution Line
- 3-day EMA is the three-day exponential moving average
- 10-day EMA is the ten-day exponential moving average
When the Chaikin Oscillator Indicator is rising, it indicates that buying pressure is increasing in the market, and that prices may soon rise. Conversely, when the indicator is falling, it indicates that selling pressure is increasing, and that prices may soon fall.
Best Settings for Chaikin Oscillator Indicator
The best settings for the Chaikin Oscillator Indicator depend on the trading strategy and the time frame being used. Generally, traders use a shorter time frame, such as 5 minutes or 15 minutes, for intraday trading, while a longer time frame, such as 1 hour or 4 hours, is used for swing trading.
Traders can also adjust the period used in the calculation of the Chaikin Oscillator Indicator. The default setting is 3 and 10 periods, but traders can adjust this to suit their trading style and strategy.
How to Trade with Chaikin Oscillator Indicator?
The Chaikin Oscillator Indicator can be used to identify potential trend reversals and to confirm trading signals. Here are two common ways to use the Chaikin Oscillator Indicator to trade in MT5:
Identifying Potential Trend Reversals
Traders can use the Chaikin Oscillator Indicator to identify potential trend reversals in the market. When the indicator diverges from the price action, it may signal that a trend reversal is imminent. For example, if prices are rising, but the Chaikin Oscillator Indicator is falling, it may signal that a trend reversal is likely.
Confirming Trading Signals
Traders can also use the Chaikin Oscillator Indicator as a confirmation tool in their trading. When the indicator confirms a trading signal, traders can have more confidence in their trading decision. For example, if prices are rising, and the Chaikin Oscillator Indicator is also rising, it may confirm a bullish trading signal.
Features of Chaikin Oscillator Indicator
The Chaikin Oscillator Indicator has several features that make it a useful tool for traders. Some of these features include:
- Real-time data on buying and selling pressure in the market
- Can be used to identify potential trend reversals and to confirm trading signals
- Can be used in combination with other technical analysis tools
Conclusion
The Chaikin Oscillator Indicator is a useful tool for traders looking to measure the momentum of buying and selling pressure in the market. By using this indicator in combination with other technical analysis tools, traders can identify potential trend reversals and confirm trading signals. The Chaikin Oscillator Indicator is easy to use and can be adjusted to suit different trading styles and time frames. Download the Chaikin Oscillator Indicator for MT5 for free today and start using it in your trading strategy.