Introduction to the Real Cloud Indicator
Seasoned traders often do not trade against the long-term trend knowing that trading against it would be a low probability trading proposition. As such, many traders try to objectively identify the long-term trend and filter their trades with it.
The Real Cloud Indicator is a tool which can help traders avoid trading against the long-term trend objectively using a visual representation of the long-term trend.
What is the Real Cloud Indicator?
The Real Cloud Indicator is a trend following indicator which is geared towards identifying long-term trend directions.
This indicator plots bars overlaid on the price chart to indicate the long-term trend direction. It plots aqua colored bars to indicate a bullish long-term trend and magenta colored bars to indicate a bearish long-term trend.
How the Real Cloud Indicator Works?
This indicator uses a pair of moving average lines to plot its cloud like structure. These moving average lines can be modified in a way that it can be based on different time frames and can use different methods of computing for moving average lines. The indicator then plots the bars based on the two moving average lines and the color of the bars change depending on the direction of the trend.
How to use the Real Cloud Indicator for MT4
The Real Cloud Indicator has several indicator options within its Inputs tab which allow users to modify its underlying moving average lines.
The “Timeframe1” and “Timeframe2” fields allow users to choose the timeframes used on the computation. Note that this field should have its inputs in minutes. Users have to multiply the number of hours on the timeframe used by 60 to arrive at the correct variable input.
“Period1” and “Period2” refers to the number of bars used by each underlying moving average line.
“Mehtod1” and “Method2” refers to the type of moving average line used for the computation.
“Price1” and “Price2” refers to the price point on each bar used as the price feed for the computation.
This indicator is best suited as a long-term trend direction filter wherein traders would trade only in the direction indicated by the Real Cloud bars and avoid trading against it. Although it can be used as a long-term trend reversal signal indicator, since it is geared towards the long-term, many of its reversal signals may be lagging. As such, it is best to use this indicator simply to avoid trading against the long-term trend.
Buy Trade Direction
Trade only buy trades exclusively whenever price action is generally above the Real Cloud bars and the color of the bars is aqua. Traders can use various bullish trade entry strategies such as pullbacks or the use price patterns and candle stick patterns.
Sell Trade Direction
Trade only sell trades exclusively whenever price action is generally below the Real Cloud bars and the color of the bars is magenta. Traders can use various bearish trade entry strategies such as pullbacks or the use price patterns and candle stick patterns.
Conclusion
This technical indicator is mainly a long-term trend direction indicator which is what a cloud type indicator should be. This is very useful since it allows traders to avoid trading against the long-term trend which significantly increases the win probability of the trade. As such, it can be used in confluence with other short-term trend or momentum reversal signal indicators for the specific entry points.
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