Most of the technical analysis indicators works well either in a trending market or in a sideways market. An indicator that works well in a trending market will not perform well during sideways market and vice versa. Historical analysis says that any market will be trending only 20% of their time and will be in a sideways market for 80% of the time. Hence it becomes important to find the nature of the market. The Phi cloud indicator is an attempt to find the direction of the market.
The Phi cloud indicator is used to differentiate between a trending market and a sideways market. This indicator consists of a cloud like that of ichimoku cloud, but the calculation is entirely different from that of Ichimoku indicators. All my indicators have a lot of parameters and must be optimized for different markets (Stocks, Index, Forex and Commodities). So to avoid confusion I will not give the details of how the indicator was developed.
How to trade Phi cloud indicator
1.Buy signal is generated when the price moves above the cloud.
2. Sell signal is generated when the price moves below the cloud.
To find the trend,
When the cloud is moving at an angle, then the trend is strong. (Arrow mark in the chart)
When the cloud is flat then the market is trading sideways. (Circle in the chart)
As with other technical analysis indicators and oscillators, this indicator along with other indicators will improve the accuracy of the trading decisions.