This content introduces and rigorously backtests the "Purple Cloud" indicator as a more efficient and profitable alternative to the Ichimoku Cloud for identifying trading opportunities.
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the ishim moku cloud is a popular
trading indicator used to identify
market trends support and resistance
levels and potential reversals however
for a beginner trailer this indicator
may be very confusing and as such
difficult to use and if you back test it
in a large sample size and different
assets you will notice that probably it
is not as efficient as you might think
but in this video I will share with you
another cloud-based indicator that is
more efficient profitable and consistent
than the isimu Cloud as you can see its
signals are more simple reliable and
allow you to catch larger price
movements so I will introduce you to
this new indicator show how to use it
and also test it on more than 3,000
trades among the Forex crypto gold and
stock market to discover its real
efficiency and stay tuned because this
will be the new top one indicator tested
so this indicator is called Purple Cloud
on trading view you can find two
versions of it that you can use but the
one that I will use is this one created
by my team which you can also use for
free you just need to enter on my free
Discord Community the link is on the
description head over to the free
materials Channel and there you will
find the code of my purple Cloud
indicator open up this note copy the
code and then on the trading view charts
click on the pine editor then on open
new indicator and then just paste the
code and save it after that just click
on the add to shart option and you will
have this indicator working and with the
right settings which are 10 3 40 and 0.9
if you like this free indicator don't
forget to show me your support by
subscribing and clicking on the like
button as you can see this indicator
which is a trend indicator calculated
based on exponential and simple moving
averages with different weights is very
simple to use because it prints the
entry signals on your shards when this
rocket appears it means it is time to
enter in the long position and when this
star appears it means you can take a
short position you may also notice that
this indicator changes the color of the
candles depending on the direction of
the signals but you can turn off this
function here if you want also as you
can see this indicator sometimes prints
these buy and sell signals but they are
weaker compared to this ones so we not
use them to enter in positions and so I
will uncheck them here and by looking at
some examples this indicator appears to
be very precise but to confirm the
results of this indicator we will need
to back test it and as I usually tell
you in all my videos about testing
indicators to conduct a proper back test
you need to have first the technical
system second the risk management rules
and third the testing conditions
regarding this last step if you have
been watch watching this series about
testing different indicators to discover
which ones are the best you already know
that my testing conditions are always
the same so I can compare the different
indicators I test fairly and efficiently
so I will back test the purple cloud in
three different time frames the 30
minutes the 1 hour and the daily one on
every time frame I will use the data
sample from 2022 and 2023 with all the
available trading sessions with an
efficient and diverse portfolio of
assets from different markets which are
Bitcoin ethereum xrp three currency
pairs gold oil the S&P 500 Index and the
Apple stock regarding the Second Step
the risk management it will also be the
same one I used in all my other episodes
using a 2% risk per dve a stop loss
calculated based on two times the
average to range indicator number and by
using a take profit on the one to one
rward ratio Zone if you'd like to know
more about this risk management system
check out the first episode of this
series finally regarding the technical
system in addition to the purple Cloud
indicator I will also use a 200 period
exponential moving average as a baseline
just to filter losing signals from the
indicator in a way that I will only
consider entry signals that are in the
same direction as the trend given by
this Baseline here you have an example
of a long position where the price is
above the 200 x exponential moving
average and here we have a short trade
example where the price is below the
Baseline and so these are our back test
conditions now as all of you should know
the most popular way of back testing is
pretty simple to do we just need to go
back in time and check every signal
manually but if you are a follower of my
work you already know that I like to use
a special tool to back test indicators
in a quick simple and efficient way and
for that I will add the indicators
testing bot to my sharts for those who
don't know this is an Innovative and
unique tool that allows quick testing of
indicators at the moment you have 48
indicators available to test among
trigger indicators baselines and even
volume indicators but from week to week
new indicators are added to the database
of this tool after you insert it on your
charts you just need to select the
indicator or indicators you would like
to test and in one second you will have
all the results on your chart in
addition to me dozens of Traders also
use this exceptional tool and the
feedback has been amazing some of them
have even managed to gain access to
funded prop firm accounts by using it so
thank you all for your amazing support
and for those who would like to use this
trading bot as well I will briefly talk
about it at the end of the video after
selecting the daa sample the risk
management the purple cloud with the
settings I told you about and the 200
period exponential moving average with a
confirmation function we are ready to
start this big analysis as you can see
the trading Bard not only displays every
valid trade on the charts but it also
gives me the monthly results on this
table and the overall statistics about
each asset I want to back test Down
Below on the strategy test Tab and
because I have the premium trading view
plan I can download all the trades the
bot takes and that's what I'm going to
do to create the trading journals I will
speed up the back test but you can slow
it down in the YouTube settings I see
you in a minute [Music]
after inserting all the trades on my
trading journal here I got the results
of the purple Cloud on the 30 minute
time frame here on the 1H hour one and
next to it on the daily time frame and
overall the results are really
impressive but let's analyze its time
frame one by one in the 30 minute time
frame after more than
1,800 trades it achieved a win rate of
52% and a net profit of
126% here you can check other metrics
like the profit factor and the average
draw down and also the results of every
single asset by looking at the equity
chart we can verify that in this time
frame the simple strategy has some
choppy moments and got a Max draw down
value above what we would expect but you
can notice that despite this it has a
growth Trend much better than most of
the other indicators we have tested so
far then in the 1our time frame things
look even better after more than
1,100 trades the purple Cloud achieved a
win rate of about 54% and the total net
profit close to
150% again here you can find other
metrics including the draw Downs which
are much lower than the previous ones
and also the results from every asset
which are quite consistent but the best
thing to look at is the equity Shard
which is very good for a simple strategy
like this one these little periods of
draw down can be easily fixed with a
filter or a volume indicator and finally
on the daily time frame after 51 trades
the indicator achieved the rate of
almost 60% and a net profit of 19%
therefore the purple Cloud indicator
proves to be efficient and has a lot of
potential in our ranking sheet it will
beat the do stochastic and will be our
new top one indicator so I believe that
this video deserves a big thumbs up if
you'd like to access this ranking sheet
Excel you can do it for free the link is
in the description as well on this stab
you can check all my tested trading
strategies and on this one the ranking
from the indicators tested on this
series where you can also find out how
you can access this indicator testing
bot I showed you during the video just
click here and despite this being our
new top one indicator I will continue to
test other indicators to try to discover
others even better so if you think you
have an indicator that can beat the
purple Cloud you can share it with me in
the comments or on my free Discord
community and probably you'll see it in
a future episode of this series so do
not forget to subscribe to don't miss
anything if you enjoyed seeing my
working methods and would like to work
oneon-one with me to enhance your
trading system and become a better
Trader you can see on my available
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