How does it work
- When the fast line cross over the slow line, it generates a buy signal. On the contrary, a sell signal occurs when the fast cross under the slower trend
- The area between the two is colored for easier understanding. Blue cloud shows "Bullish", gray cloud shows "Bearish"
- If prices are above the blue cloud, it indicates a strong .
- When prices go under the gray cloud, a strong is observed.
- Prices being in the cloud should be treated as a "Hold" signal. In this case, the fast trend will act as resistance and slow trend act as a support. Position should be changed according to the situation.
- While there is a blue cloud, that is, in the bull trend, the two moving too far from each other may indicate a possible correction / reversal.
- While there is a gray cloud, that is, in the bear trend, the divergence of two from each other may indicate a possible correction / reversal.
- While in the , prices move far from the cloud and re-enter into the cloud in near time. When these levels are monitored carefully, a return from a possible bear trend can be caught early.
As with every indicator, it can produce false signals in the horizontal market, so it should not be used alone. I continue to improve on it to put it in less positions due to commission and slip, not to generate false signals in the horizontal market. Now I can say that it produces good results in daily periods, not bad in hourly and 4 hours periods. Backtest is required for shorter periods. Please feel free to comment and write for my improvement.
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