EMA Cloud on Thinkorswim
The EMA Cloud is a Thinkorswim indicator that uses two exponential moving averages (EMAs) to visualize the relationship between short-term and long-term price action.
It was created by the well-known trader/coder Ripster in June 2020 and you can see his original code in his tweet here.
The indicator consists of a red line, which represents the short-term EMA, and a green line, which represents the long-term EMA with the area between the two lines representing the cloud.
The Theory Behind the EMA Cloud on Thinkorswim
It is a useful tool for identifying trends and trend reversals. When the short-term EMA is above the long-term EMA, it indicates that prices are in an uptrend. On the other hand, when the short-term EMA is below the long-term EMA, it indicates that prices are in a downtrend.
The width of the cloud can also be used to gauge the strength of a trend where a wide cloud indicates a strong trend, while a narrow cloud indicates a weak trend.
A reversal is signaled when the direction of the short-term EMA and the long-term EMA change. For example, if the short-term EMA is above the long-term EMA and the direction of the two moving averages changes so that the short-term EMA is now below the long-term EMA, this would be a bearish reversal signal.
The EMA Cloud is a versatile indicator that can be used in conjunction with other indicators and analysis techniques to make more informed trading decisions. The best time to use it will depend on your individual trading strategy and goals and it is suitable for day traders and swing traders.
However, there are also some drawbacks to using the EMA Cloud indicator. These include:
- The indicator is lagging, meaning that it will not provide leading information about future price movements.
- The indicator is subject to interpretation, and different traders may interpret it differently.
There are a few ways of implementing the EMA cloud on Thinkorswim, both free and paid, so let’s take a look at options available to you.
Options for Implementing EMA Cloud on Thinkorswim
Free EMA Cloud on Thinkorswim: Ripster’s Original Code
Users have reported that sadly it no longer works on Thinkorswim mobile, only desktop, though apparently this was due to TOS themselves and not Ripster.
Paid EMA Cloud on Thinkorswim: Global Trading Software Add-on for $99
At the time of posting this article, the indicator sells for $99 for a lifetime license.
You can adjust the settings to any EMA length which makes it suitable for both day traders and swing traders and it certainly is visually impressive with very clear clouds and color schemes allowing you to quickly identify what is happening.
They have a 7-minute video from April 2022 explaining how best to use it here:
In conclusion, the EMA Cloud on Thinkorswim can be a versatile indicator that can be used on your desktop and is easy to interpret as it is very visual and can be used to identify trends and trend reversals.
After learning about EMA Cloud on Thinkorswim, you should also have a look at The Basics of Thinkorswim Studies and Conditional Orders and How to Flatten Position on Thinkorswim.