BACD Cloud

Or Bermaui Average Convergence


Divergence Cloud,
is an oscillator that show trend direction and measure average momentum. Indicator calculation is explained in next steps:

1- Calculate two exponential moving average. One of them is faster than the other. I will call the first (Fast) and the second (Slow)

2- Find the center between them, where: Center MA = (Fast + Slow) / 2

3- Calculate BACD Line as follow: BACD = 100 * (Fast / Center MA)

4- Calculate the BACD Signal Line, which is an exponential moving average of the BACD. The formula is like this: BACD
Signal = EMA (BACD)

5- Hide the BACD Signal line from the chart.

6- Calculate the BACD Histogram Line, which is the difference between BACD Line and its signal line. (Note:
The BACD Histogram is draw on the chart as a line, not a histogram.)

7- If (BACD Line > BACD Histogram Line) then draw a Green
Cloud
, to represent the trend.

8- If (BACD Line < BACD Histogram Line) then draw a Red
Cloud
, to represent the trend.

BACD Cloud is similar to classic MACD oscillator. As it consists from three line studies, which are
BACD Line,
BACD Signal,
BACD Histogram.
The BACD Line show the difference in speed between two moving averages, but it does the calculation to give
results in percentages.






The BACD Signal is a moving average of the BACD Line, that is hidden from the chart.

The BACD Histogram Line show the difference in speed between the BACD Line and BACD Signal.



I
draw the BACD Histogram as a line (instead the histogram shape at the classic MACD) and it appear on the chart with the BACD Line to form
together what I call BACD Clouds.

When BACD Line is higher that BACD Histogram Line then we got a Green Cloud, which show that current trend is bullish.
When BACD Line is lower that
BACD Histogram Line then we got a Red Cloud, which show that current trend is bearish.




How to trade with the BCAD Cloud?

When I trade with BACD Cloud I use BACD Cloud signals and divergences to find entry setups.

BACD Cloud has a different way in showing its signals that classic MACD. Instead of depending on the cross between the main line and the signal
line – like in classic MACD – the BACD Cloud depend on the cross between the BACD Line and the Histogram line to get its trading signals. This
give signals that last longer.




There is two kind of divergence between BACD Cloud and price candles. The first is

One Cloud Divergence
, while the second is
Two Cloud Divergence
.

Here is an example for bullish One Cloud Divergence


Here is an example for bearish One Cloud Divergence



Here is an example for bullish Two Cloud Divergence



Here is an example for bearish Two Cloud Divergence



By using divergence methods and signal arrows a trader can catch the trend from a good point. Also, BACD Cloud have a built in panel that
contain four useful tools. those tools facilitate the analysis of the chart and make it much easier to find price targets. So, let us talk a
little about those tools and how to use them.

Zig Zone Levels

Some people like to call them ” Supply and Demand Levels”. The idea of those levels is to find important peaks and valleys on the chart, then to use
them to draw horizontal areas that form a kind of support and resistance on the chart.

When prices move in an uptrend this indicate that demand is above supply and when the opposite happen and price move in a downtrend this indicate
that supply exceed demand. But when a peak or a valley forms, balance between supply and demand happen, and a support or a resistance area is
established.


Next chart show how Zig Zone Levels determine important pivots on the chart.


Rounded Numbers Grid

Rounded numbers are numbers that end with zeros like (1.2000 – 1.2100 – 1.2200…etc.) Price candles have a great tendency to reverse near a rounded
number because of their psychological value for the traders in the market.

Next chart show how price candles find support and resistance near rounded numbers grid.


Standard Deviation Channels

This is one of the most important tools you have here, because price candles stay inside the two standard deviation channel 89% of the time and
stay inside the one standard deviation channel 68% of the time. This mean that standard deviation channels have extreme importance as
overbought and oversold area.

Next chart show how price candles reverse their direction each time that go through the standard deviation channels.


Symbol Switch

BACD Cloud have a symbol switch panel that pop up on the main chart window when you click on its button. You can use the panel to easily switch
between different symbols and time frames. You can write your own list of symbols or you can switch between symbols from the Market Watch.



BACD Cloud Color Lists

All my current and future products will have four different color list for the user to make choice from. There are two reason for color lists.

  • First is to reduce the number of unnecessary parameters and concentrate on important parameters only.
  • Second is to give chart a professional format similar to that found on high technical analysis platforms like Tradestation, Tradingview
    and stockCharts

Take in note that the user can switch to his own color list by choosing (Do Nothing) from the list.



BACD Cloud Alerts

Alert messages can be received via three different methods:

  1. Pop up message with sound
  2. Mobile notification
  3. Email message



.



Can I use your indicator to build my own EA?

Yes, you can. Here is a separate blog to explain in details how to use BACD Cloud to build your own EA.
(Link to the
blog: Comming soon)

That is all for now. If you have any other questions, then inbox me and I will answer you as soon as I am
online.

 

I wish everybody green pips.

Best regards

Muhammad Al Bermaui, CMT

www.bermaui.com



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