Tuesday, November 4, 2014

Can We Use Twiggs Money Flow for a Divergence Strategy?

Will Twiggs Money Flow Show Divergences?

This indicator is created by the folks at Incredible Charts and is derived from the Chaikin Money Flow but fixes some of the CMF's weaknesses. The main difference is the exponential smoothing of the Accumulation Distribution values from which the Money Flow is derived. More info can be found at Incredible Charts.

Price and volume are very important to determine the  health of the market. The TMF uses averages to account for gaps and yesterday's market as well as today's.

One great feature about this indicator is that it illustrates divergences well and it can be adapted to long or short periods.
Its signals are simple and easy to read making it perfect for scanning for divergences.

Difference Between Macd and Twiggs Money Flow

Here is a chart for Fedex with the Macd and the Twiggs Money Flow indicators. You will see that there is a divergence showing on the TMF but not much on the Macd. The reason being that the TMF is accounting for volume as well as price, thus being, perhaps, a much more definitive indicator for this purpose.

I have collected some articles to outline some applications of the Twiggs Money Flow. You wiull see that the first two were written by Mr Colin Twiggs, who better than he to explain how the indicator can be used with real time examples.

Asia: Governor Kuroda bets on QE | Gold, Stocks & Forex
Tue, 04 Nov 2014 00:05:25 -0800
The Nikkei 225 surged through 16300, signaling a fresh advance. The long-term target is 18000*. Reversal below 16000 is unlikely, but would warn of another correction. Recovery of 13-week Twiggs Money Flow above zero ...
Read more ...

October correction nearing end | Gold, Stocks & Forex
 Sat, 25 Oct 2014 01:45:53 -0700
Penetration of the descending trendline suggests that the October correction is over. Recovery of 21-Day Twiggs Money Flow above zero indicates medium-term buying pressure. Expect a test of resistance at 2000 followed by ...
Read more ...

And this last article is an explanation about the indicator written by a blogger

Welcome to My Domain: Twiggs Money Flow
 Sun, 20 Feb 2011 18:14:00 -0800
Twiggs Money Flow is a derivation of Chaikin Money Flow indicator, which is in turn derived from the Accumulation Distribution line. However, Twiggs Money Flow makes two basic improvements to the Chaikin Money Flow ...
Read more ...

This is a direct link to Incredible Charts where there is a complete explanation of the Twiggs Money Flow Indicator.

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