What Is Chaikin A/D Oscillator

Developed by Marc Chaikin, the Chaikin Oscillator measures the momentum of the Accumulation Distribution Line using the MACD formula. This makes it an indicator of an indicator.

The Chaikin Oscillator is the difference between the 3-day EMA of the Accumulation Distribution Line and the 10-day EMA of the Accumulation Distribution Line.

Chaikin A/D Oscillator Indicator

The Chaikin Oscillator is a momentum indicator and measures the momentum of the Accumulation Distribution Line using the MACD formula.

How To Calculate Chaikin A/D Oscillator

Here’s how to calculate the Chaikin Oscillator

ADL=M(Period−1)+M(Period)

CO=(3-day EMA of ADL)−(10-day EMA of ADL) 

Where

ADL is Accumulation Distribution Line

CO is Chaikin Oscillator

Why Use Chaikin A/D Oscillator

Firstly, it is essential to remember that the Chaikin Oscillator is an indicator of an indicator that measures the momentum for the Accumulation Distribution Line. This makes it at least three steps removed from the price of the underlying security. Traders can also use the CO to define a general buying or selling bias simply with positive or negative values.

How To Use Chaikin A/D Oscillator

The Chaikin Oscillator measures the momentum of the Accumulation Distribution Line using the MACD formula and is the difference between the 3-day and 10-day EMAs of the Accumulation Distribution Line.

Moreover, it anticipates directional changes in the Accumulation Distribution Line by measuring the momentum behind the movements.

Hence we can say that the Chaikin oscillator is the volume-weighted version of the MACD. When the 3-period EMA moves above the 10-period EMA, it means that the Accumulation Distribution line is rising and buying pressure is accumulating. Hence we can go long. Conversely, one can go short when the 3-period EMA moves below the 10-period EMA.

Defining a Bullish Scenario to generate a buy signal:

  • When the 3-period EMA moves above the 10-period EMA, it means that the Accumulation Distribution line is rising and buying pressure is accumulating. Hence we can go long.

Defining a Bearish Scenario to generate a sell signal:

  • When the 3-period EMA moves below the 10-period EMA, it means that the Accumulation Distribution line is falling and selling pressure is accumulating. Hence we can go short.

Building Chaikin A/D Oscillator Trading Strategy On Mudrex:

You can create strategies on Mudrex using simple ‘blocks’. You can connect multiple blocks and define conditions on those connections or ‘paths’ to create your strategy on Mudrex.

As discussed above, lets first write our entry/exit conditions so that we know what to do:

BUY: When Chaikin crosses above zero

SELL: When Chaikin crosses below zero

Overall Strategy: The overall strategy on mudrex looks like this

Testing: We can now run a quick back-test to see how our strategy performs

Other links:

A few quick references below:

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