The forex cloud system is based on a cloud indicator which follows the trend and an oscillator which is generating the buy and sell entry signals.
Let’s take a look how this system works.
Used MT4 indicators: ForexCloud.ex4 (default settings), laguerre.ex4 (default settings)
Preferred time frame(s): 5 min charts and up
Recommended trading sessions: London and US for M5, M15 and M30 charts. Any session for H1, H4 and D1.
Currency pairs: Any + gold
Example: USD/JPY 1 Hour Chart
The 1 hour trading chart above is an example of the forex cloud system in action on the USD/JPY pair.
The chart shows our proposed short entries (7), no valid buy signals.
To protect your short position, place the initial stop-loss just above the red cloud.
- Price above the green forex cloud
- Laguerre oscillator crosses 0.15 upward. The indicator must have reached 0.0 first (extremely oversold)
==> Open long trade. Set stop-loss 1 pip below the green forex cloud.
Take profit: Take profit at risk-to-reward 1:2 or higher. Alternatively, trail your original stop-loss up just below the green cloud (this works great in big trends).
- Price below the red forex cloud
- Laguerre oscillator crosses 0.75 downward. The indicator must have reached 1.05 first (extremely overbought)
==> Open short trade. Place your stop-loss 1 pip above the red forex cloud.
Take profit: Take profit at risk-to-reward 1:2 or higher. Alternatively, trail your original stop-loss down just above the red cloud.
- Price trades inside the cloud indicator.