Hi all and I hope you all are having a profitable week.

First of all sorry to all those that are not interested in the Stormy indicator, I promise to get back to some Theory articles and live trading in the New Year.

I have had an astonishing response to the Stormy indicator, all positive which is fantastic, but with that has been many requests on a guide on how to trade the clouds. As this is an early version, and it is still a work in progress, I didn't have time to get an official guide together, but, to help those that need it, below is a very basic suggestion on how you might like to trade with Stormy:

A Storm is Brewing

You will notice within the clouds that they "darken", i.e. black lines are drawn instead of the blue ones. These areas are warnings that there is possibly a sharp move on it's way, and in a perfect world, a rain storm coming when the cloud is broken.

Below is an example:

So one method is to trade the darkened areas, this is a riskier method though as the direction is hard to pick quite often and so, if you are not vigilant with your stop losses, things could turn ugly. The profits though can be quite substantial per trade.

An alternate way is to wait for a close above or below the clouds, and open a trade in that direction, in strong moves this get's you in while things are moving in your direction, but there will be occasions where the move falters and in some case turns as it finds the clouds too strong to break through.


Boing Boing Boing

Another way to trade the clouds is to look for signs of weakness at the top and bottom of the clouds which could result in bouncing around within the clouds, i.e. range trading within the clouds. The safest way to trade this is to go for smaller more frequent pip gains. For example:


In my testing, I have found this to be a very nice, reliable method, with a target of around 10-15 pips each trade, you can have some very profitable days. Yesterday for example, I traded this method across the majors for a return of +107 pips in only a couple of hours of trading. Most targets being between 10-20 pips each so you don't need a trend change to close a trade in profit, just for the price to falter as it get's contained by the cloud temporarily. Of course if it does turn completely, you can move your stop loss to something like +10 and let it run.

Other things to look for are bounces off the clouds once the price has broken out of them, and looking across different time frames can help quite often in getting good entry and exits. I'm sure there are many other ways of trading them, but these are just a few ideas in it's early stages.

Oh in terms of time frames, I tend to trade them off 1H charts presently, but I know others have had success on as small as 15M charts.

Happy trading!

This entry was posted on Friday, December 30, 2005 at 12:24:00 PM. You can skip to the end and leave a response.