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- Signals moving in the direction of the medium-term trend are more reliable than those moving against it.
- The fact that an oscillator confirms a new maximum or minimum doesn't mean that the prices will move on in that direction. I regard this event as unimportant.
Another way of using Chaikin's oscillator implies the following: a change in its direction is a signal for purchase or a sale, but only if it coincides with the price trend direction. For example, if a share is on the rise and its price is higher than a 90-day moving average, then an up-turn of the oscillator curve in the area of negative values can be regarded as a signal for purchase (but the share price must be higher than a 90-day moving average - not less).
A down-turn of the oscillator curve in the area of positive values (above zero) can be regarded as a signal for sale, but the share price must be lower than the 90-day moving average of closing prices."
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Chaikin Oscillator
Calculation:
To calculate the Chaikin's oscillator, you must subtract a 10-period exponential moving average of Accumulation/Distribution indicator from a 3-period exponential moving average of the same indicator.
CHO = EMA (A/D, 3) - EMA (A/D, 10)
where:
- EMA - exponential moving average;
- A/D - value of the Accumulation/Distribution indicator.
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