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The name Ichimoku tells a lot about the trading system, or at least it gives a
description of the system.
Now….
Before we delve deeper into the Ichimoku Cloud strategy, let’s look at the
indicators needed to successfully trade the strategy.
In the Ichimoku cloud section, we are going to give you an in-depth overview
So, before moving forward, let’s define all the Ichimoku Cloud components. We
will review how to correctly interpret the trade signals generated by this
technical indicator.
1. Tenkan-Sen line also called the Conversion Line, represents the midpoint of
the last 9 candlesticks. It’s calculated with the following Ichimoku formula: [(9-
period high + 9-period low)/2].
2. Kijun-Sen line also called the Base Line, represents the midpoint of the last
26 candlesticks. It’s calculated with the following formula: [(26-period high + 26-
period low)/2].
3. Chiou Span also called the Lagging Span, lags behind the price (as the name
suggests). The Lagging Span is plotted 26 periods back.
4. Senkou Span A also called the Leading Span A, represents one of the two
Cloud boundaries and it’s the midpoint between the Conversion Line and the
Base Line: [(Conversion Line + Base Line)/2]. This value is plotted 26 periods into
the future and it’s the faster Cloud boundary.
5. Senkou Span B or the Leading Span B, represents the second Cloud
boundaries and it’s the midpoint of the last 52 price bars: [(52-period high + 52-
period low)/2]. This value is plotted 52 periods into the future and it’s the slower
Cloud boundary.
6. Chikou Span represents the closing price and is plotted 26 days back.
Next...
See below:
Once Leading Span A and Leading Span B have been identified, the “cloud”
component of this graph will be shaded in. When Leading Span B is above
Leading Span A, this indicates to traders that price momentum is currently
increasing. When this is the case, the graph will be shaded green.
On the other hand, when Leading Span A is below Leading Span B, the
underlying asset is likely moving in a negative direction. When this happens, the
cloud will be shaded red. Despite the graph’s complications, simply looking at
the colors of the cloud can help you determine the direction of the market.
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The strength of the Ichimoku trading signals are assessed based on three
factors:
Because many of the lines on the Ichimoku Cloud chart are created using
averages, the chart is often compared to a simple moving average chart.
However, Ichimoku is more dynamic than a simple moving average chart as it's
designed to help detect changes in support and resistance.
The relationship between Leading Span A and Leading Span B will indicate
whether there is a strong downtrend or uptrend. Pay attention to both the color
(green for bullish, red for bearish) and the size of the cloud. When the “cloud”
between these lines is small, then the trend will not be very strong.
The Ichimoku Cloud is useful for day traders and others who need to make
quick decisions. The cloud is often paired with other technical indicators, such
as the Relative Strength Index, in order for traders to get a complete picture of
resistance and support. Many traders will also look out for crossovers in order
to determine when trends have reversed.
Ichimoku cloud trading requires a lot of self-discipline. This is because you have
to wait for the best trade signals. We’re going to use the default settings of the
Next...
Let's see a unique way day traders can take advantage of a very unique price
pattern:
See below:
According to the Ichimoku cloud edge to edge strategy, the price has the
tendency to visit the other side of the Kumo cloud once a candlestick closes
inside the Ichimoku cloud.
As you can figure out the Ichimoku buy sell signals are very intuitive:
1. Buy signals occur when a candlestick from below the Kumo cloud breaks and
closes above the Leading span A
2. See signals occur when a candlestick from above the Kumo cloud breaks and
closes below the Leading span A
On a day to day basis, you’ll have enough edge to edge trade signals to reach
Now, if you want to improve the stats of the Ichimoku cloud day trading strategy
you can always use the other elements of the Ichimoku indicator to filter out
some of the false signals that will naturally show up.
Next…
See below:
Now:
The Kumo cloud twist happens when the Leading Span A and Leading Span B
cross. When Leading Span A crosses above Leading Span B that’s a bullish
reversal signal and when Leading Span A crosses below Leading Span B that’s
considered to be a bearish reversal signal.
Now, let's move one step forward and learn how to make money by applying
the Ichimoku trading rules.
Note* Moving forward, we’re not going to delete the Lagging Span moving
average from our charts. This is because we don’t base our trade decision
on it since it’s lagging the price.
The Ichimoku Kinko Hyo best time frame is the one that fits you best. As we
don’t have a preferred time frame.
This swing trading strategy will teach you how to ride the trend right from the
beginning. You will also learn how to capture as many profits as possible.
The cloud is built to highlight support and resistance levels. It highlights several
layers deep because support and resistance is not a single line drawn in the
sand. It is several layers deep.
So, when we break above or below the Ichimoku Cloud, it signals a deep shift in
the market sentiment.
A high probability trade setup requires more layers of confluence before pulling
the trigger.
This brings us to our next requirement for a high probability trade setup.
Now, we’re going to lay down a very simple entry technique for the Ichimoku
Kinko Hyo trading system.
See below….
So, after the crossover, we buy at the opening of the next candle.
See below…
First, it’s significantly lowering the risk of losing big money. Second, it helps us
trade with the market order flow.
The next logical thing we need to establish for the Ichimoku trading system is
where to take profits.
See below…
When the conversion line crosses below the baseline we want to take profits
Alternatively, you can wait until the price breaks below the Cloud, but this
means risking to lose some parts of your profits. In order to gain more,
sometimes you have to be willing to lose some.
Note** the above was an example of a BUY trade using the advanced
Ichimoku trading strategies. Use the same rules for a SELL trade – but in
reverse. In the figure below, you can see an actual SELL trade example.
We hope that by now you’re convinced that the Ichimoku Cloud system is a
good way of identifying the trends and profit from trading any market in any
time frame. It can easily capture 80% of the trend if you follow the rules in the
Ichimoku Cloud explained section.
Please leave a comment below if you have any questions about Best Ichimoku
Strategy!
Please Share this Trading Strategy Below and keep it for your own
personal use! Thanks, Traders!
TradingStrategyGuides
47 comments
Newest comments first
Bishwas K.C.
June 6, 2021
vijaya
June 6, 2021
I tried back testing this strategy for bitcoin with 1hour time
frame, and result is not good. It seem not good for coin
Joseph
TradingStrategyGuides
Glad it helped!
Felicity
Janmajay Meher
Rahul Trivedi
March 3, 2021
Best
TradingStrategyGuides
March 4, 2021
Thank you!
HI
1st of all i would like to Thank you.
Please if you have the possibility to explain these questions.
1. i use different time frames, which is the best for you ? i
mean in day trading
2, The clouds after the candels do the (let's say it like this )
predict the future Resistance and support ?
mahendra
February 1, 2021
g g pathmananda
December 8, 2020
TradingStrategyGuides
You're welcome!
Chibuzor
TradingStrategyGuides
wans
Layi
Jonathan
Prince
August 4, 2020
Glad it helped!
Michael
Wow... Awesome
Please can we use it on multiple time frame
Trevor
Adaji
sHANKAR
Earl
MANOHAR RAMANJI
Jahi
Iddy Bukko
Patton
April 5, 2020
Hi, thank you so much for your kindly explaination for this
cloud strategy, I more understand it after I read your article
than other's article.
Please, I have a question, if we use this strategy on hourly
data, should we wait for the same pattern occur on 4 hour
data too in order to make an entry point? Or we just look for
the entry point pattern at hourly data only?
Thank you for your explaination.
Bernard Cherestal
April 5, 2020
Hey, i really appreciate everything you guys have done and all
the time and effort you put in to helping us. I can’t say thank
you enough for putting all of this together. My only question is,
what currency pairs work best with this strategy?
sanju
March 2, 2020
Hi, Thanks a lot for this strategy. it's very well explained but I
have a small doubt about which timeframe data is best to use
for this strategy like Seconds data or Hourly data or Daily
data. I implementing this strategy on Hourly data but do I need
to take seconds data for this Step #3 Buy after the crossover
at the opening of the next candle.
TradingStrategyGuides
March 6, 2020
Cloud Nguyen
May 8, 2020
I found the longer the timeframe the more accurate the entry.
But if you are using the 1H timeframe and above, you will
need a lot of patience and don't enter trades blindly or rush
into it. I personally use 15m and it works great also.
October 9, 2020
What do you use as your stop-loss for the lower time frame
trades? (the guide emphasizes cloud breakout, but most
intraday trades are already well above the cloud breakout).
Thanks!
TradingStrategyGuides
Chris
TradingStrategyGuides
Hey! first off thanks for your kind words. It means alot to see
that people like you are loving this content. You would buy
when price has broke above, like you said.
George
TradingStrategyGuides
kees
12
TradingStrategyGuides
Yes that is correct! And thanks for the comment, glad you
enjoyed the content.
Sam
Can you explain why in the sell example you have to wait?
The candle broke and closed below the cloud. The baseline
was already over the conversion line. You are proposing
waiting and letting the Conversion line cross over the
baseline and then the baseline cross back over the
conversion line. Has it been your experience that when the
candle breaks the cloud and the baseline is already over the
conversion line there will be a retrace? This allows the
Cloud Nguyen
May 8, 2020
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