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Regardless of whether you are a fundamental or technical analyst, you understand the stock market runs on liquidity. Liquidity affects money flow; thus following money flow indicators will tell you whether to lean more bullish or bearish.

With that information in hand, you can make a more informed decision on whether or not to enter a trade – or when to get out of one. You’ll also know when a pattern is changing so you can adjust your trading strategy. Use one, some, or all of the six money flow indicators below to guide your trading.

6 money flow indicators to follow

Chaikin Oscillator

This is my favorite money flow indicator. It tells you the strength of price moves, demand, and possible changes in price trends. When price and the Chaikin Oscillator diverge, that’s a signal that the current price trend will reverse.

When the oscillator is rising and above the zero line, bulls can take full advantage of trading opportunities.

Elder’s Force Index

Dr. Alexander Elder’s force index measures the power of bulls behind a market rally and bears behind a falling market. It looks at the direction of price change, the extent of the price change, and trading volume. When you use it with a moving average, the reading is pretty accurate at measuring a change in a bullish or bearish trend.

Ease of Movement Indicator

This indicator looks both price volatility and volume to measure the strength of an underlying trend. It tells you how easily a price can move up or down based on momentum.

Negative Volume Index

The Negative Volume Index (NVI) uses change in volume to analyze what the big money is doing. The ideas is that institutions produce moves in price that require less volume than regular traders like you and I. It rises on days of positive price change on lower volume and falls on days of negative price change on lower volume.

Volume Oscillators

A volume oscillator calculates volume by measuring the relationship between two moving averages. It rises in a rallying market and declines or moves horizontally in a bearish market. When an equity becomes overbought, it reverses direction.

Money Flow Index

The Money Flow Index (MFI) uses price changes and trading volume to tell us more about market sentiment for an equity or index. When it hits extreme readings (above 80 or below 20) a change in trend is likely coming.

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