If you plot the Chaikin oscillator on your trading chart, you will notice that it comes with 1 line that moves above and below zero. This line tries to show the momentum of a trend. The Chaikin oscillator will try to show the buying and selling pressure. Indicators like the Chaikin oscillator, which try to show the momentum of a trend, have worked really well on this channel. So let’s see if this indicator performs good as well after 100 trades.
The idea is pretty simple, when the Chaikin oscillator is above the zero line, the buying pressure is high.
Similarly, when the Chaikin oscillator is below the zero line, the selling pressure is high.
The basic strategy based around the Chaikin oscillator goes like this. When the Chaikin oscillator is crossing above the zero line, it’s a buy signal.
And when the Chaikin oscillator crosses below the zero line, it’s a sell signal.
In this example, the Chaikin oscillator crossed above the zero line. So entry is at the first candle that closed above the zero line of the Chaikin oscillator. And in this example, the Chaikin oscillator crossed below the zero line. So entry is when the first candle closes below the zero line.
But what about long term? Will this indicator
work in the long run? Before we test the Chaikin oscillator 100 times, we will have to modify the Chaikin oscillator strategy to fit with the trend. Taking every single trade will make you lose money. But we can use the 200 E MA to find the long term trend direction.
So the better chaikin oscillator trading strategy goes something like this.
Buy when the Chaikin oscillator crosses above the zero line, and if price is above the 200 E MA. As for the stop loss, you can set it below the pullback.
And Sell when the Chaikin oscillator crosses below the zero line, and if price is below the 200 E MA. Stop Loss is above the pullback. Furthermore, in both of these setups, the entire candle has to be above or below the 200 period moving average.
In this example, the price stayed above the 200 E MA, so we are only going to buy. The Chaikin oscillator gave a long entry signal, so entry is at the closing price of the candle. Stop Loss is below the swing low.
In this example, the price stayed below the 200 E MA, so we are only going to sell. The Chaikin oscillator gave a short signal, so the short entry is at the closing price of the candle that crosses below the zero line, and set the stop loss above the swing high.
The Chaikin oscillator trading strategy was tested on the 30 min timeframe and on the Euro JPY pair. And after testing the Chaikin oscillator 100 times, here’s what happened.
Number 1. At the start, when price was in an uptrend, Chaikin oscillator gave multiple winning trades in a row. The indicator gives many entry signals in a short period of time, but these entry signals are not bad like some other indicators we have seen on this channel.
When the trend was coming to an end or was changing direction, the Chaikin oscillator did give a decent amount of false signals, but it makes up for that by giving many good signals in a strong trend.
You can see this in the Trading Rush App, when the price was trending, the profit line was going up. Then it slowly went down when the price was changing the trend direction or was moving slowly. It gave back some of the profit it made, but when price started to move again in one direction, it made even more profit. You can filter the range market by using other indicators like the alligator. I have already discussed more about the alligator indicator on the Trading Rush channel, check it out to learn more.
Number 2. Unlike some other indicators, there is nothing particularly bad about the Chaikin Oscillator. The entry signals it gives are not late most of the time, and because of this, your pullback stop loss stays smaller.
After testing the Chaikin oscillator 100 times, I got an approximate win rate of 47 percent, which is a profitable win rate because we used a 1.5 to 1 reward risk ratio. The profit graph in the Trading Rush App looks good and is going up, with few pullbacks when the price starts moving sideways. In the end, it managed to make money, with 7 losses in a row, but 11 winning trades in a row.
And now, let’s give the Chaikin oscillator a Trading Rush score.
In the win rate category, Chaikin oscillator gets a 5.5 out of 10. Win rate is good and profitable, but not high as some other trading strategies we have seen on the Trading Rush channel.
In the easy to use category, it gets a 7.5 out of 10. The Chaikin oscillator strategy is fairly straightforward and all you have to do is look at a line when it crosses above or below another line.
If we talk about the reliability category, it gets a 6 out of 10. The Chaikin oscillator gives many winning trades in a row, but also gives many false signals in a row. Strategies that give multiple signals in a short period of time, are usually not that good, because when price stays in the sideways direction for a long time, you can lose a lot of money if the signals are false.
If we talk about consistent profits, it gets a 5 out of 10. The profit graph in the Trading Rush App went up in the long run, but there were sudden upward moves, and many losing trades in a row. The profit graph you will get with the Chaikin oscillator strategy won’t be as consistent as some other strategies.
If we talk about the quality of the entry signals, the Chaikin oscillator strategy we tested in this video, gives entry signals in the direction of the long term trend direction, where price has higher probability of moving. And because it doesn’t give late entry signals most of the time, it gets a 7 out of 10.
So the overall Trading Rush score is 31 out of 50. Other trading strategies that had excellent win rates after testing 100 times, will get a Trading Rush score soon.
Trading Rush
