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How To Trade The One Glance Indicator, Ichimoku
How To Trade The One Glance Indicator, Ichimoku
Table of Contents
Ichimoku: The “One-Glance” Trend Following Indicator ................................................................ 3
Understanding Ichimoku......................................................................................................................... 4
Disclaimer..................................................................................................................................10
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
Many traders have turned to indicators to help provide information about the state or condition of
price action to make an informed trading decision. Some indicators are helpful for defining, and
trading trends like Ichimoku and others are helpful for finding mean reversion opportunities like
Stochastics and other oscillators. For many reasons soon to be described, Ichimoku has stood the
test of time.
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
Understanding Ichimoku
Ichimoku is a technical or chart indicator that is also a trend trading system in and of itself. The
creator of the indicator, Goichi Hosada, introduced Ichimoku as a “one glance” indicator so that in a
few seconds you are able to determine whether a tradable trend is present or if you should wait for a
better set-up on a specific pair.
Before we break down the components of the indicator in a clear and relatable manner, there are a
few helpful things to understand. Ichimoku can be used in both rising and falling markets and can be
used in all time frames for any liquid trading instrument. The only time to not use Ichimoku is when
no clear trend is present, which is made obvious by the price oscillating on either side of the cloud on
the time frame you’re using to analyze price.
Ichimoku has five lines that make up the indicator. These lines are compared to the current price to
help you as a trader recognize three crucial components:
• The primary trend on the time frame you use for trading
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
3. Senkou Span A / Leading Cloud Line – Midpoint of 1&2 shifted forward 26 bars
o Midpoint between Trigger Line & Base Line projected 26 bars forward
o Moves faster when both the Trigger and the Base line is moving in the same direction
4. Senkou Span B / Lagging Cloud Line – 52 bar midpoint, shifted forward 26 bars
o Slower of the two lines forming the Cloud − Based on a 52-bar current range
o Helps to compare current price with four Ichimoku line 26-periods earlier
o Watch for lagging line to break cloud opposite from prior trend
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
As you get comfortable in interpreting the five lines of Ichimoku we just discussed, you may soon use
the different components of the cloud to act as a built-in stop and profit targets.
So how does a trader know whether they should be looking to buy or sell with Ichimoku? Here is a
quick list:
1) Start with the cloud. Look to buy (sell) if the price is above (below) the cloud.
2) Find markets where the lagging line is above (below) price and the cloud from 26-periods ago.
3) Time your entry to buy (sell) by entering when the trigger line is above (below) the base line
The component of Ichimoku that I utilize to recognize a reversal is the lagging line in relation to the
cloud and price. If an uptrend is reversing, or I believe an uptrend to be reversing, I will like for price
confirmation by seeing if the price is trading below the cloud. If Price is below the cloud, I will look to
the lagging line, which is 26-periods behind the current price to see if the lagging line is below price
from 26-periods ago and the cloud from 26-periods ago. If so, I would be looking for opportunities to
enter a short trade.
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
As a trader, we still must be aware of the significant amount of Type 1 errors or “false positives” we
get with technical analysis. Therefore, it’s helpful to manage risk and place stops. It may serve you
well to be most wary of a true trend change at the beginning, and only allow confidence and possibly
trade size to increase as we collect more data.
In short, Ichimoku is looking for strong trends on the time frame you like to analyze and trade.
Ichimoku does this by effectively drawing out support via the Ichimoku Cloud and providing a
momentum visualization with the lagging line. Regardless of the time frame you are trading, if you
have a strong trend and momentum at your back, you’re likely pretty happy if you’re following the
trend. Thankfully, Ichimoku can help you recognize and take advantage when those situations do
arise.
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
Once you have used Ichimoku to enter a trade, you need to know whether you have a profit target or
whether you’re looking to ride the trend until Ichimoku that a reversal could be developing. If you have
a price target, you should manage your risk by adjusting your stop as the market moves in your favor
to limit your risk as you wait for your profit target to get hit.
If you are riding the trend until it ends, you would want to stay in the trend until price either hits a
trailing stop or preferably until the lagging line breaks below the cloud, which would show you with a
higher probability that the trend may be reversing. Following trends can be emotionally difficult but
can lead to the best trades.
Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all
investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances.
Forex trading involves risk. Losses can exceed deposits.
We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.
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HOW TO TRADE THE “ONE GLANCE” INDICATOR,
ICHIMOKU
DailyFX Research Team
Disclaimer
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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of
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your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain losses in
excess of your initial investment. You should be aware of all the risks associated with foreign exchange trading, and seek
advice from an independent financial advisor if you have any doubts.
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