The optimal wavelength detecting the height of cloud is analyzed. Profiles of molecule extinction coefficient and aerosol extinction coefficient, which is necessary for signal estimation, are presented. Calculation for the geometric overlap factor with the existing slit diaphragm in a co-axial lidar is also given. Based on the specific features and lidar equation, simulations of the backscattering power and impact on the signal to noise ratio are discussed when the emitting power, emitting pulse numbers and width of the filter change. Results are meaningful for discussing the ceilometer’s detecting capability, and it offers theoretical basis to determine technical parameters of a ceilometer.