What is Twiggs Money Flow?

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What is Twiggs Money Flow?

Category: Tags: asked June 22, 2012

8 Answers

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Twiggs Money Flow is my own derivation, based on the popular Chaikin Money Flow indicator, which is in turn derived from the Accumulation Distribution line. We are all indebted to Marc Chaikin and Larry Williams for the contribution they have made to the field of technical analysis and price-volume oscillators.Twiggs Money Flow warns of breakouts and provides useful trend confirmation. It is based on the observation that buying support is normally signaled by:•increased volume and•frequent closes in the top half of the daily range.Likewise, selling pressure is evidenced by:•increased volume and•frequent closes in the lower half of the daily range.

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Colin Twiggs based the design of his Money Flow Index (MFI) on a previous momentum indicator that was produced by Marc Chaikin. His MFI is very similar to the Relative Strength Index (RSI), but it is volume-biased. This means that instead of measuring the price of a currency pair against RSI, MFI measures volume. During Forex trading, the MFI attempts to quantify the money flow into or out of currency pairs. MFI is considered a valuable tool for detecting pattern reversals and trend weaknesses. Twiggs’s research demonstrated that an increase in the number of daily bull closes accompanied by rising volumes normally preceded buying opportunities. In contrast, increases in the number of daily bear closes supported by rising volume levels usually preceded selling opportunities.MFI has a very strong correlation with the RSI and both operated a range between 0 and 100. MFI records overbought conditions when it posts values of 80 or above whilst it registers oversold conditions with reading of 20 and below. The MFI tracks Forex producing a similar pattern to price. As such, any discrepancies in the directions of price and MFI are important because they are advising about possible changes in the direction of price. For example, if price is rising but MFI begins to drop, then a market top may be forming. Basically, MFI is calculated by first multiplying the average price by volume resulting in a money ratio value. The MFI reading is then produced by ranging this value between 1 and 100. You should best use the MFI in the following ways to detect new trading opportunities.When the MFI rises above 80 and then drops back below this value, you should consider activating a short trade. Similarly, if MFI falls below 20 and then reverses back about this value, you should consider going long. If you should spot any divergences between the directions of the MFI and price, then you should expect that price will change its direction soon.Source :Daily Forex by Terry Allen

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Twiggs Money Flow is my own derivation, based on the popular Chaikin Money Flow indicator, which is in turn derived from the Accumulation Distribution line. We are all indebted to Marc Chaikin and Larry Williams for the contribution they have made to the field of technical analysis and price-volume oscillators.

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The Twiggs money flow index by Colin Twiggs is a variation of the Chaikin money flow index (see Chaikin Money Flow) using true range so as to include gap moves, and using EMA smoothing (see Exponential Moving Average) to avoid jumps when a high volume day drops out of the calculation.

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The Twiggs money flow index by Colin Twiggs is a variation of the Chaikin money flow index using true range so as to include gap moves, and using EMA smoothing to avoid jumps when a high volume day drops out of the calculation. The default EMA period is 21 days, and the period is reckoned by J. Welles Wilder's method.See formula from here- http://user42.tuxfamily.org/chart/manual/Twiggs-Money-Flow.html

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The Twiggs money flow index by Colin Twiggs is a variation of the Chaikin money flow index (see Chaikin Money Flow) using true range so as to include gap moves, and using EMA smoothing (see Exponential Moving Average) to avoid jumps when a high volume day drops out of the calculation. The formula is / close - truelow \ EMA[N] of volume * | 2 * ------------------ - 1 | \ truehigh - truelow / Twiggs MF = -------------------------------------------------- EMA[N] of volume truehigh = max (high, prevclose) truelow = min (low, prevclose)The default EMA period is 21 days, and the period is reckoned by J. Welles Wilder's method (see Exponential Moving Average).

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It is based on the popular Chaikin Money Flow indicator, which is in turn derived from the Accumulation Distribution line. Twiggs Money Flow warns of breakouts and provides useful trend confirmation. It is based on the observation that buying support is normally signaled by:increased volume and frequent closes in the top half of the daily range. Likewise, selling pressure is evidenced by:increased volume and frequent closes in the lower half of the daily range.

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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 formula: 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.

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