Blockchain and Cryptocurrency Advanced - CMF Indicator’s Role in Confirming the Direction of Trend

Confirming Uptrend

The CMF is great for confirming the direction of a market trend. When the price is moving in an uptrend direction, the CMF indicator will indicate by the oscillator line also rising in an upward slope and moving above the 0 line. For the trend confirmation, the CMF oscillator line has to remain above the 0 line to confirm that the market is in an uptrend direction and the strength of the uptrend if the oscillator line continues to remain above the 0 line.

When the oscillator line is above 0 and remain above the 0 line, it basically means that there are more buyers in the market and the buying pressure is high which is causing the price to rise. This can be as a result of accumulation in the market. Looking at the BNB/USDT chart, we can see that as the market reversed into an uptrend, the CMF indicator indicated that as the oscillator line crossed above the 0 line and remained above the 0 line to confirm the uptrend.

BNB/USDT Chart

Confirming Downtrend

When the price is moving in a downtrend direction, the CMF indicator will indicate by the oscillator line also falling in a downward slope and moving below the 0 line. For the downtrend confirmation, the CMF oscillator line has to cross below the 0 line and remain below the 0 line to confirm that the market is truly in a downtrend and the strength of the downtrend becomes stronger if the oscillator line continues to remain below the 0 line.

When the oscillator line is below 0 and staying below the 0 line, it basically means that there are more sellers in the market and the selling pressure is high which is causing the price to fall. This can be as a result of distribution in the market. Looking at the AAVE/USDT chart, we can see that as the market reversed into a downtrend, the CMF indicator indicated the downtrend movement as the oscillator line crossed below the 0 line and remained below the 0 line to confirm the downtrend.

AAVE/USDT Chart