Twiggs Money Flow Indicator developed by Colin Twiggs. This is a variation on the Chaikin Money Flow or CMF indicator. It uses True Range and volume. The adjustable guides are given to fine-tune the signals. The traders of this indicator may change method (EMA) period lengths and guide values. The Chaikin Money Flow uses Close Location Value (CLV) to evaluate the volume of money flow as bullish or as bearish, Twigs Money Flow, uses the TR (True Range). This indicator also relies on moving averages in its calculation while Chaikin uses cumulative volume.
How To Apply Twiggs Money Flow Indicator On Chart?
If traders want to attach the Twiggs Money Flow indicator, then they can find it in the STUDIES section of Zerodha Kite and it is also available in Kite mobile App. The Period is 21 and you can set and change this value. This indicator is used on to any charts that includes daily time frame, weekly time frame, monthly time frame or intraday time frame. You can also Check the image below to understand how we attached the TMF indicator in HDFC Bank share price chart.
Description Of Twiggs Money Flow Indicator:
Traders calculate the Twiggs Money Flow (TMF) indicator formula as percentage ratio between MA applied to weighted volume and volume MA. In this indicator where weighted volume named as Range Volume by Colin Twiggs. It uses close price location in relation to True High and True Low as the weighting coefficient. The TMF indicator, when the close price is located at True High, 100% of the volume is considered as bullish volume. Another is when close price located at True Low, 100% of the volume is considered as bearish volume. Also part is when it is Close then the price is exactly in the middle between True High and True Low. In this time the weighed volume or range volume is equal to zero. This is same as with Chaikin Money Flow (CMF). The positive Twiggs Money Flow readings is a sign of the bullish pressure and negative TMF readings are the indication of bearish sentiment. The Twiggs Money Flow indicator will indicate to buy when it turns positive and to sell when it turns negative. Although, bullish signals of this indicator could be generated when bullish divergence is noted. In the same way, sell signals of this indicator could be generated on bearish divergence.
The Twiggs Money Flow indicator is also a quite choppy indicator. This is why in some cases it could be recommended using moving average applied to it. In the Twiggs Money Flow (TMF) indicator’s charts traders may see this MA as a signal line applied to TMF. In another case, signals could be generated on the crossovers of the signal line and zero line. This is the crossovers of the TMF and the signal line and on the divergence of the signal line.
Formula and Calculations of Twiggs Money Flow Indicator :
- LL = minimum value (current low or previous close).
HH = maximum value (current High or previous close).
Exponential Moving Average (EMA) = a weighted moving average (applies more value to the most recent data).
- TMF = EMA [Volume *((Close – LL) / (HH – LL) * 2 – 1 )] / EMA [Volume] * 100.
Or another 2 steps are :
step 1 : Range = (Close – LL) / (HH – LL) * 2 – 1 ).
step 2 : Range = (2*Close – LL- HH) / (HH – LL).
- RangeV = EMA (Volume * Range).
- TMF = RangeV / EMA(Volume) * 100.
- TMF Signal Line = EMA (TMF).
How To Track If A Stock Has The Key Factors That Defines A True UP Trend Of Twiggs Money Flow Indicator:
- Price making higher highs and higher lows of this indicator.
- Higher amounts of money or volume trading in the stock each day of TMF indicator.
- Closing higher and higher in its daily trading range of this indicator.
- Whether the range is expanding or contracting of Twiggs Money Flow (TMF) indicator.
If all of these qualities of Twiggs Money Flow indicator’s are in place, traders agree this confirms an uptrend is truly in place. Therefore the smart money is likely accumulating a position in the stock or index TMF indicator is applied to. If this is taking place, then this indicator will rise in value and continue to make new highs along with the stock’s movement.
- If traders see that the level of the stock is increasing and this indicator is going the opposite way. Then it could quite likely indicate that a bubble is building. This type of situation is called the distribution zone. It means the rally that the stock or index is enjoying is likely the smart money offloading their positions to the public before a big drop takes place.
- In the opposite way, if the traders see that the price level of a stock is dropping but the Twiggs Money Flow is moving opposite. Then this is the upwards direction. Another, this indicates accumulation is going on and a possible strong reversal could be coming in the stock.
The most valuable method of TMF indicator to predict major market moves. This can also capture significant profits by tracking the smart money. The main part is described how it moves and the key indicators signaling which way the money is flowing. A critical factor of this to track where the Smart Money is going is Twiggs Money Flow indicator. This indicator is based on Chaiken’s Money Flow. TMF utilizes Volume as a measure of market conviction. It seeks to weed out false signals and smooth the signal line created by Chaikin Money Flow (CMF). This is based on the Accumulation or Distribution line and simple moving averages. This TMF seeks to quantify the amount of money flowing into or out of the market. It utilizes volume and assumes that in a bull market prices will close in the upper half of the range. In this indicator, the reverse is true in a bear market. This TMF indicator is intended to confirm breakouts and also trends. The TMF is an oscillator moving above and below the zero line. This indicator is supposed to give signals based on extreme spikes, divergences and convergences.
Categories: Technical Indicators