CMF also has a tendency to “bark twice”. The formula sums Accumulation Distribution for 21 periods and then divides the total by the sum of volume for the identical period. Chaikin Money Flow drops sharply at as the stock gaps downward on exceptionally high volume, indicating distribution. 22 days later at , Chaikin Money Flow jumps upwards when the data on day is dropped from the indicator window. There is no unusual volume or price event on day . Price gaps up with strong volume but Chaikin Money Flow dips – because the close is below the mid-point between the day’s high and low. To solve the problem with gaps, Twiggs Money Flow uses true range, rather than daily Highs minus Lows.
And, rather than a simple-moving-average-type formula, Twiggs Money Flow applies exponential smoothing, using the method employed by Welles Wilder for many of his indicators. The stock gaps downward at on exceptionally high volume. Twiggs Money Flow and Chaikin Money Flow drop sharply, indicating distribution. There is no unusual volume or event 22 days later at , reflected by the smooth indicator line on Twiggs Money Flow. By contrast, Chaikin Money Flow jumps up sharply at when day data is dropped from the indicator calculation. Price gaps up on day with above-average volume.