The Twiggs Money Flow and Its Superiority to the Chaikin Money Flow
The Black Book of Day Trading Strategies
1,000 complete strategies · 31 chapters · Full trade plans
The Twiggs Money Flow, developed by Colin Twiggs, is a volume-weighted indicator that is similar to the Chaikin Money Flow (CMF). However, it uses a more sophisticated calculation that is designed to be more responsive to changes in market sentiment. This makes it a more effective tool for identifying buying and selling pressure.
Mathematical Formulation
The calculation of the Twiggs Money Flow involves several steps:
- True Range:
Max(High - Low, abs(High - Previous Close), abs(Low - Previous Close)) - Money Flow Multiplier:
((Close - Low) - (High - Close)) / (High - Low) - Money Flow Volume:
Money Flow Multiplier * Volume - Twiggs Money Flow:
21-period EMA of Money Flow Volume / 21-period EMA of Volume*
Application in Trading
The Twiggs Money Flow is used in a similar way to the CMF to identify buying and selling pressure. A positive reading indicates buying pressure, while a negative reading indicates selling pressure. However, because it uses the True Range in its calculation, it is better able to handle gaps in the price action. This makes it a more reliable indicator of the underlying money flow.
Actionable Example:
A divergence between the Twiggs Money Flow and the price can be a effective signal of a potential trend reversal. For example, if a stock is making new highs but the Twiggs Money Flow is failing to do so, it suggests that the buying pressure is weakening and the rally may be losing momentum.
| Date | Price | Twiggs Money Flow (21-day) |
|---|---|---|
| 2026-07-01 | 120 | 0.15 |
| 2026-07-02 | 122 | 0.20 |
| 2026-07-03 | 121 | 0.18 |
| 2026-07-06 | 123 | 0.22 |
| 2026-07-07 | 125 | 0.25 |
| 2026-07-08 | 124 | 0.23 |
Advanced Twiggs Money Flow Strategies
The Twiggs Money Flow can be used in conjunction with other indicators to create more robust trading signals. For example, a buy signal from the Twiggs Money Flow that is confirmed by a bullish crossover of the MACD is a more reliable signal than a buy signal from the Twiggs Money Flow on its own.
Furthermore, the Twiggs Money Flow can be used to identify the long-term trend of the market. A positive Twiggs Money Flow reading suggests that the long-term trend of money flow is positive, while a negative reading suggests that it is negative.
By incorporating the Twiggs Money Flow into their analysis, traders can gain a more accurate picture of the dynamics of money flow and make more informed trading decisions.