Chaikin Oscillator: MACD applied to accumulation instead of price

What it measures

The Chaikin Oscillator is a MACD computed on the Accumulation/Distribution line rather than on price: a short exponential average of it minus a long one.

Because the underlying series already encodes where each bar closed within its range and how much volume traded, the oscillator measures the momentum of accumulation, not the momentum of price.

That is the whole point. Price momentum and accumulation momentum routinely disagree, and the disagreement is the signal.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Build the Accumulation/Distribution line: for each bar, take the close position within its range, multiply by volume, and accumulate.

2. 2

   Take a three-period exponential average of that line.

3. 3

   Take a ten-period exponential average of the same line.

4. 4

   Subtract the long from the short.

Settings

Three and ten are Chaikin originals. Widening the gap between them makes it slower and reduces the number of zero crossings, but the underlying A/D line dominates the character far more than the two periods do.

How to read it

• Crossing above zero means short-term accumulation has overtaken long-term, which Chaikin treated as a buy confirmation.
• Divergence against price is the primary use: price making a new high while the oscillator does not means the advance is not being accumulated into.
• The magnitude is volume-scaled and therefore instrument-specific; only the shape and the zero crossings transfer between charts.
• It is a confirmation tool and produces poor signals when used alone.
• The clearest setup is a price consolidation with the oscillator rising throughout it: distribution would show the opposite, so a rising reading through a flat market means the sideways move is being accumulated into rather than sold into.

Where it misleads

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