Chaikin Oscillator

Marc Chaikin developed a new indicator following the work of Joe Granville and Larry Williams. The Chaikin Oscillator is a moving average oscillator based on the Accumulation/Distribution indicator.

Calculation Method

This indicator is calculated by taking the difference of the exponential moving averages of the Accumulation/Distribution values over two different periods:

Chaikin Oscillator = EMA(A/D, 3) - EMA(A/D, 10)

where:

• EMA(A/D, 3): Exponential Moving Average over a 3-day period of the Accumulation/Distribution indicator
• EMA(A/D, 10): Exponential Moving Average over a 10-day period of the Accumulation/Distribution indicator

Example

Interpretation

This indicator can be interpreted based on divergences. Thus, when prices reach new highs while the oscillator fails to exceed its previous highs, this theoretically gives a signal (and conversely in the opposite direction).

The most important signal generated by this oscillator occurs when prices reach a new high or low for a "swing", particularly in an overbought or oversold phase, and the oscillator, failing to exceed its previous extremum, changes direction.

A second way to use the oscillator is to consider that changes in direction of the indicator are buy or sell signals, but only when they occur in the direction of the trend.