This indicator will help us indentify trend direction and give us trading signals.
It looks more complicated than it is and I will share a few keypoints
on how to use it. Im far from a profesional trader, Im doing this
mostly to educate myself and to share some thoughts.
The cloud is shifted 26 days forward, so it’s plotted 26 days ahead of the last price point
to indicate future support or resistance levels.
1. If we're under the cloud, the trend is negative
2. If we're in the cloud, the trend is flat
3. If we're above the cloud, the trend is positive.
4. The colors of the cloud reinforces the strength of the trend. An uptrend is strengthened when Leadin Span A (green line) is rising and above Leading Span B (red line).
This is how the green cloud is formed. The red cloud forms if Span A is falling and below Span B.
Conversion Line (Blue, 9-day moving average) and Base line (Orange, 26- day moving average). The inputs, 9 and 26 are the same periods used in MACD. I changed the Base line to orange from red.
1. If the price moves above the Base line, we have bullish momentum, since the price moves above the 9-day moving average.
2. If the Conversion line moves above Base line, we have bullish momentum, since the 9-day moving average is catching up the 26-day average. We get a bearish momentum if the opposite happens.
For the daily Chart we can see easily see that we’re still under the cloud, and the resistance at 11700 we failed to break is lined up with the Leading Span B. And the price is right above the Conversion Line, which seems to be working as support the last days. If we’re going below this we might be going further down. In other words, BTC has to stay above the conversion line and base line and break the Leading Span B to get out of the downtrend.
Please let me know if there is anything important that Ive missed
Might update more on smaller timeframes later
Without the short-position which I forgot to remove