Chaikin Oscillator Smoothed Indicator MT4 | MT5

The CHO Smoothed is a smoothed version of the standard Chaikin Oscillator (CHO), developed for better trend clarity and reduced false signals. It incorporates an additional smoothing filter, such as Exponential Moving Average (EMA) or Weighted Moving Average (WMA), applied to the classic indicator: CHOsmoothed = EMA/WMA(CHO, period).

When plotted on a trading chart, the CHO Smoothed displays two lines:

-A blue line represents the original CHO.

-A red line represents the smoothed CHO.

These two lines can be used for various interpretations and trading strategies: 

• Potential trend reversals:

- Bullish divergence: If the price forms lower lows while the CHO line indicates higher lows, that suggests a potential reversal to an uptrend. 

- Bearish divergence: If the price presents higher highs while the CHO line forms lower highs, that signals a potential reversal to a downtrend. 

• Trend direction and strength:

- When the blue line crosses above the red one and then above the zero level, it indicates a bullish momentum, signaling a long opportunity.

- When the CHO line crosses below its smoothed line and the balance line respectively, it suggests a bearish movement, providing a potential sell signal.

When combined with other categories of technical analysis indicators, such as trend-following, volume, or patterns, the chaikin oscillator smoothed can enhance trading accuracy to traders.

1. In the USDJPY trading example on the MT4 chart, when the cho line crosses above its smoothed line, followed by a crossover above the zero level as well, signaling an upward trend. During an uptrend, traders should be looking only for long entries. So any crossover below the balance line indicates an exit point for long positions and above it signals a strong buying opportunity.

Near the trend's end, the price forms higher highs, but on the other hand, the indicator forms lower highs, indicating a potential bearish divergence. When the CHO falls below the balance line, that confirms the bearish reversal, signaling a selling opportunity.

2. In the AUDCAD trading example on the MT5 chart, when the blue line crosses below the red line, followed by a crossover below the balance line as well, signaling a downward trend. In every market movement, there are impulses and corrections. During a downtrend, traders should be looking only for short entries. So any crossover above the balance line indicates an exit point for the short position and below it signals a strong selling opportunity.

Toward the trend's end, as shown on the chart, the price forms lower lows while the CHO shows higher lows, suggesting a bullish divergence. When the indicator rises above the zero level, that confirms the bullish reversal, signaling a buying opportunity.