The EQ Cloud consists of multiple EMA's (Exponential Moving Averages).
EMA's are used by many traders to read the direction/trend of the market! EMA's are essentially Moving Averages (MA's) that use recent price history to then calculate a "weighted" average price. These Averages are displayed as EMA lines which were converted into a cloud. This cloud was then developed with more logic and conditions in order to create a stronger more effective Indicator. Since the cloud has many EMA lines built into it this indicator is very powerful and can be very versatile.
The EQ Cloud has a lot of logic built into it. If we look closely there are "Bands" that make up the Cloud. Each band consists of multiple EMA Lines. Open the below screenshot to see the different bands within the cloud.
- The EQ Cloud will turn Red if the candles break below the Cloud and the confirming signal is red.
- If the EQ Cloud is Red and Candles are below the Cloud you are most likely in a bearish trend
- The EQ Cloud will turn Green if candles break above the Cloud and the confirming signal is green.
- If the EQ Cloud is Green and Candles are above the Cloud you are most likely in a bullish trend.
We can see in the above screenshot that when the EQ Cloud was pointed down and candles were posting below the cloud. The Cloud was almost all Red other than the Bottom band that was green. When the EQ Cloud is primarily Green you are likely in a Bullish Movement. If your Cloud is primarily Red you are most likely experiencing a Bearish Movement or pull back. Our EQ Cloud began to change from being pointed down to pointing sideways and then pointing up.
The EQ Cloud will guide you! Take into consideration what direction the EMA cloud is pointed. In the above screenshot our EQ Cloud began to change from being pointed down to pointing sideways and then pointing up. The EQ Cloud is great at understanding the directional trends in the market.
- If the EQ Cloud is pointed down and candles are below the Cloud we know that we are in a stronger down trend and the Cloud will be Red.
- If the EQ Cloud is pointed up and candles are above the cloud we know that we are in a stronger up trend and the cloud will be Green.
If your candles enter into the cloud you can consider the market to be indecisive until new candles post above or below the Cloud confirming the direction of the market.