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Trading Strategy - Ichimoku without Secrets

Trading Strategy - Ichimoku without Secrets

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piter44 Publicar un artculo : 10 Feb

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Over one year ago I started with Ichimoku, I spent a lot of hours before I understood it correctly. I took a while but finally It becomes a
profitable system. In this article in simple words I will describe how ichimoku works and how it can be used in trading.

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Ichimoku is complex strategy invited by Goichi Hosoda. Complex means that it can be use alone without any others indicator.
Ichimoku is a trend following strategy, that means that it wont catch tops and bottoms but it tells us that we are in trend (Not in a
correction). This strategy also show exact entry and exit poins! We have few techniques. (I will describe all of them).

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To be honest, it is not Holy Grail as false signals happend but Ill describe how they can be minimalized.
Lets go to the point:
Ichimoku has five lines:
1. Tenkan Sen
2. Kijun Sen
3. Chikou Span
4. Senkou Span A
5. Senkou Span B
I will add line by line and explain them:
1. Tenkan Sen (formula (HH+LL)/2 from last two periods).
For us it is very important line, we open positions only in accordance with this line!

2. Kijun Sen (formula (HH + LL)/2 from last 26 periods)

Second important line, signals I will describe later but this line can be use also as a stop loss line!

3. Chikou span (this is price line moved back by 26 periods)

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4&5.
Senkou span A (formula: (Tenkan Sen + Kijun Sen)/2 moved forward 26 periods
Senkou span B (formula: (HH + LL)/2 from last 52 periods and moved forward 26 periods)
This line create well known Kumo:

At glance it looks little complicated but when you get familiar with it, it take few seconds to analyze the chart.
Entry Signals:
1. Tenkan and Kijun cross - it is most known ichimoku signal:

when red line (tenkan) cross blue line (kijun) from bottom we have buy signal and when this cross is above kumo we have
stron b); signal and when below we have weak signal.

when red line (tenkan) cross blue line (kijun) from top we have sell signal and when this cross is below kumo we have stron
signal and when below we have weak signal.
when the cross happens inside the kumo we have neutral signal (false signal)

2. Senkou A and Senkou B cross - this is stron signal but often other signal appears earlier. (remember that this signal is moved
forward 26 periods)

3. Three line signal - it occurs when all three lines points same direction: tenkan is above kijun and both are above kumo and
senkou span A is above senkou span B (buy signal) and vice versa for sell signal.

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4. Kumo breakout
This signal occurs when price closes above/below the kumo and we take a trade in the direction of breakout.

Last but not least!

In all cases above I check the position of chikou span line! This is our filter!
The rule is simple: chikou span has to be on our side, it means that when we take short trade chikou span has to be below price and
if we take long one then chikou span has to be above price (in the past)
How I exit from trades:
1. I use Kijun sen as my stop loss (if bar close at the second side of Kijun sen I close the trade).
2. I use second side of Kumo, usually with kumo breakout entries, it means when I enter with this signal I exit when the price close
on second side of the kumo.
Settings:
Basic setting are 9,26,52. I use 7,28,119 but everyone can adjust them, just find what works best for you.
I hope that you enjoy this article. In case of any questions feel free to ask and I will try answer them.
Regards!
Piter

Etiquetas: Technical analysis Trend Ichimoku Trading Strategy

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10.02.2015

Comentarios
Olga18375 10 Feb
Good article Piter!!
piter44 10 Feb
Thanks Olga!
VictoriaVika 12 Feb
Very informative, useful advices were given, thank you for sharing some trading knowledge.
Agnessa26 12 Feb

22/6/2016 9:40 a. m.