Ichimoku Cloud Trading Guide | Ichimoku Kinko Hyo ...
Alex Rodionov
Today, I will explain how to use the Ichimoku Kinko Hyo indicator, or Ichimoku (Ichi Cloud) for short. I will cover in detail how the Ichimoku Kinko Hyo mt4 works and what the Ichimoku trading system. I will also write about the best Ichimoku Kinko Hyo settings. You will learn how to read Ichimoku signals and how to trade Ichimoku cloud. And finally, I will explain the Japanese candlestick signals in the Forex Ichimoku trading system.
The article covers the following subjects:
- What is Ichimoku Kinko Hyo: Definition and History
- Ichimoku Cloud Calculation & Formula
- Ichimoku Indicator Elements
- How to use Ichimoku Cloud in Forex trading
- Parameters and values: Ichimoku Kinko Hyo best settings
- How Ichimoku Cloud Works in Forex Trading: Signals & Strategies
- Japanese candlesticks in the Forex Ichimoku trading system
- Ichimoku trading strategy
- Conclusion and a trader opinion of Ichimoku Kinko Hyo
- Ichimoku Cloud FAQ
What is Ichimoku Kinko Hyo: Definition and History
The Ichimoku Kinko Hyo, or Ichimoku for short, is a standard trend indicator included in the list of built-in indicators of the Meta Trader and other trading platforms.
Forex Ichimoku trading system combines three technical tools in a single Ichimoku Kinko Hyo (IKH) indicator to trade Forex.
Ichimoku Kinko Hyo is used to gauge the future price momentum and to determine the future support and resistance zones to make profitable trades.
According to ichimoku history, the term Ichimoku Kinko Hyo is Asian, namely, Japanese. Ichimoku translates to “a glance”, Kinko means “equilibrium”, while Hyo is Japanese for “chart”. Altogether, Ichimoku Kinko Hyo translates to “a glance at a chart in equilibrium”.
This all-in-one technical indicator Ichimoku cloud is composed of five lines, which are called tenkan-sen, kijun-sen, senkou span A, senkou span B and chikou span.
Ichimoku is a Japanese forex analysis tool, which allows traders to analyze charts faster and more accurately.
Using the Ichimoku trading system download is quite common in the forex market, especially at the Asian trade sessions.
The Ichimoku developer, Goichi Hosoda, designed the tool to analyze the Japanese stock market. Hosoda utilized daily and weekly charts in the analysis. His disciples have been following this rule for the Ichimoku trading so far. The Ichi cloud is much less effective in shorter timeframes, because all indicator instruments and their periods were initially tied to the number of working days in a month. If you plan to use Ichimoku on smaller timeframes, you will need to change its default settings and experiment with their different values for optimal results. We will talk about the ichimoku kinko hyo best settings later, but now we will draw the following conclusion: the Ichimoku indicator is designed for medium-term and long-term trading, i.e. for analyzing daily and weekly charts.You don’t have to download ichimoku cloud indicator mt4, as it is included into the platform indicators list.
History of Ichimoku Kinko Hyo indicator
The Ichimoku cloud technical indicator was developed by Goichi Hosoda, a Japanese journalist, in the late 1930s. The analyst published his article in the trading journals, he was used to be known as Ichimoku Sanjin.
The technical analysis indicator was named after his pseudonym. The original aim was to predict the trend of the Japanese major stock index Nikkei. The primary task of the Ichimoku cloud indicator is the identification of a trend that is represented as the signal line, and the secondary task is to show the support/resistance levels.
Although Ichimoku developed the tool before World War Two, he released his findings to the general public much later, in 1968. He spent 30 years perfecting the technique.
Ichimoku Cloud Calculation & Formula
The Ichimoku cloud is composed of five lines, each of them is calculated according to their own formula. The timeframe determines the ichimoku kinko hyo settings.
Kijun sen is the average value of the highest high and the lowest low for a specific time period. The default value in the ichimoku formula is 26.
Where:
Max(High, M) — the highest high for a period
Min(Low, M) - lowest low for a period
M - period.
Tenkan sen is calculated similarly, only the period is shorter (the default is 9)
Where:
(Max(High, N) - the highest high for a period
Min(Low, N) - lowest low for a period
N — is the period
Chikou Span is the current Close projected back by the period set (default is 26)
Senkou Span A is the averaged value of Tenkan-sen and Kijun-sen, projected ahead by the set period (26 by default).
Senkou Span B calculates the average of the highest high and the lowest low over the period set (default is 52), plotted 26 periods ahead.
Where:
Max(Z) — the high for the chosen period.
Min(Z) — the low for the chosen period.
Z — period.
The suggested default values for the Ichimoku settings are offered by the indicator developer, they are designed for the stock market. So, the ichimoku cloud best time frame starts from D1 nad higher. You can experiment with the periods, adjusting them to the type of market you are going to analyze.
Ichimoku Indicator Elements
The Ichimoku indicator is composed of several elements: three lines and two Ichimoku clouds of different colors.
Two Ichimoku indicators are separate tools serving as moving averages. However, they are not moving averages in fact. The Ichimoku cloud lines have some peculiar features, which I will cover below.
The third line is a kind of oscillator to filter trading signals.
The clouds can be upward or downward, the color indicates the trend prevailing in the market.
The below screenshot displays how the Ichimoku graph looks in the price chart with the default settings.
Tenkan Sen (Turning line)
Tenkan sen (the red line) averages the highest high and the lowest low for the first time period. The default value 9.
The Tenkan sen indicates the short-term trend and its changes. It also serves as support or resistance level, depending on which side the price approaches it from.
Traders use the Tenkan sen signals to enter short-term trades at the very beginning of the trend reversal or immediately after the end of the correction to add up to the positions entered in the trend.
That is how Tenkan sen looks separately from other Ichimoku tools:
Kijun Sen (Standard line)
Kijun Sen (the blue line) averages the values of the highest high and the lowest low for the second time period. The default value is 26.
The Kijun Sen indicates a more global trend, the medium-term trend. The Kijun Sen period is longer than that of Tenkan, so the price breaks out this level much more seldom. The trend changes also more seldom.
The Kijun sen signals are stronger. Traders see this line as an independent support or resistance line. The signal is also delivered when Tenkan sen and Kijun sen meet.
That is how Kijun sen looks separately from other Ichimoku tools:
Senkou Span A (First leading line) and Senkou Span B (Second leading line)
Senkou Span A and Senkou Span B form the edges of the cloud. The A line averages the values of Tenkan and Kijun, it is plotted 26 periods ahead. The B line calculates the average of the highest high and the lowest low over the past 52 time periods. It is also plotted 26 periods ahead.
These two lines can also serve as independent support and resistance lines. However, the major function of these lines is to form the Ichimoku cloud.
Depending on which line is higher (Ichimoku Span A or Span B), the Ichimoku cloud assumes one color or another, and suggests the likely trend direction in the future.
In the Ichimoku cloud settings, you can set your own period for the Senkou Span B line.
This is how the Senkou Span A and Senkou Span B lines look separately from the other Ichimoku tools:
Chikou Span (Lagging line)
Chikou Span (the green line). It is the so-called lagging span ichimoku. It calculates today's closing price projected back 26 days on the chart.
This line serves as an oscillator. It indicates the price deviation from the previous values. Differently put, traders look at price deviations from this line to understand when the trend will exhaust and a correction might start. Accordingly, they decide on whether they should exit the trades and could trade against the trend. I will cover the Chikou span signals in detail later.
This is how the Chikou span line looks separately from the other Ichimoku tools:
Kumo
In addition to the base lines, there are some other prominent elements of the indicator, filled zones. They are the so-called Ichimoku clouds. The cloud is the area between the Senkou lines А and B.
If Senkou A is below Senkou B, the zone is purple, which signals a downtrend.
If Senkou A is above Senkou B, the zone is orange and the trend is up.
Ichimoku clouds predict long-term price trends. If the price is currently above the cloud, and the cloud is orange, it is relevant to buy. If the price is below the cloud, and the cloud is, accordingly, purple, then it is relevant to sell.
The filled areas represent support and resistance zones for a long-term trend.
For example, there is a clear gold price uptrend:
A clear gold downtrend:
When the cloud changes the color, the trader should expect a new long-term trend
How to use Ichimoku Cloud in Forex trading
We have studied technical aspects of the lines’ calculation. Now, let us see what these lines are used for and what they mean.
In general, the Ichimoku cloud is designed to spot direction and momentum in order to help you make buy and sell decisions more easily. You can have a brief look at the chart and see the trend direction and the price location relative to the support/resistance levels, and then, you can look for a corresponding pattern to enter a buy or sell trade.
An important note. The tool was designed to analyze quite long timeframes, daily and weekly charts of the Nikkei. Later, this algorithm was applied to the forex chart analysis.
Besides, financial markets are more volatile than 90 years ago. The Ichimoku Cloud still quite accurately anticipates middle- and long-term trends, but it can also be employed in shorter Forex trading timeframes, starting from H1.
I do not recommend using timeframes shorter than one hour. Perfect timeframes to trade with the Ichimoku cloud are H1-D1.
You can trade any currency pairs.
How to identify the trend using Ichimoku Cloud?
The long-term trend is defined using the filled zones, Ichimoku clouds. If the price is trading below the cloud, the trend is down. If the price ticker in the chart is trading above the cloud, the trend is up.
The color of the cloud is also important. A purple cloud means that the price could fall soon. An orange cloud signals that the price should start rising soon.
A perfect case for entering buy trades is when the price is trading above the orange cloud.
When the price is trading inside a cloud it means there is no clear trend.
The medium-term trend is defined by the Kijun line, and the short-term trend is indicated by the Tenkan line. These lines are basically common moving averages, but the calculation is different. They are the average of high and low over a particular time. There is an opinion among the speculators trading with the Ichimoku cloud that the Tenkan and Kijun lines are more accurate than common EMAs.
You should also assess the direction of these lines and the angle. The more acute is the angle, the stronger is the trend.
When Tenkan and Kijun are horizontal, there is the accumulation zone in the market.
As the Ichimoku technical tool is a leading indicator, it can be used to anticipate the market situation in the medium-term and long-term outlook. The clouds projected into the future give clues on possible movements of the trend.
The below screenshots present the examples of such projections:
The role of dynamic levels of Ichimoku Kinko Hyo
All Ichimoku lines, except the Chikou span, may serve as important levels. THey provide ichimoku kinko hyo info. It is suggested that the Tenkan line is rather weak, while the Kijun line is a much more important level.
Senkou A and Senkou B are key levels, which are the strongest. The cloud itself is also a level.
Let us see how it works on an example:
Flat zones - Ichimoku clouds
Flat zones are Ichimoku clouds, within which you can also trade. As you know, when an instrument is trading flat, one should enter trades at the borders of the trading range. If the price goes into the filled zone, the Senkou A and Senkou B become reference levels, where one could enter trades with targets at the opposite level.
The above figure displays the GBPUSD H1 chart. You can see that, on April 23, 2022, the price broke through the Senkou A line and entered the cloud.
Next, via the retest of the broken-out Senkou A, the price reached Senkou B and even went beyond the cloud zone. At the next bar, however, the price rolled back to the trading range, drawing a false breakout pattern. The false breakout of the Senkou B was a signal to enter a sell trade with the target at the opposing strong level.
Note that the price has twice tested the Senkou A line from above after it broke the line out. A buy pattern was formed at the Asian session and, later, at the European session. At the U.S. session, the market sent a signal to sell the GBPUSD.
The role of the Chikou span oscillator
Basically, the Chikou line is a momentum indicator. Like any oscillator, it is designed to indicate the price deviation from the average value. Significant deviations create the overbought/oversold zones, which indicates a potential correction or a trend reversal.
Parameters and values: Ichimoku Kinko Hyo best settings
Let us enter the Ichimoku indicator parameters. We see three variables:
Tenkan period (default value = 9)
Kijun period (default value = 26)
- Senkou Span B period ( default value = 52)
The default settings of the Ichimoku cloud are quite effective, so I do not recommend beginners to change them. When you study the working principle of the Ichimoku tool, you can experiment with its parameters.
Originally, Goichi Hosoda, when developing the indicator, referred to the Japanese stock market and Japanese working days, which were six days a week at that time. So, he took a period of 1.5 weeks for the Tenkan line. The 26 period originally meant the number of working days in a month, and 52 is the number of weeks in a year.
You can set the indicator parameters according to the current conditions:
- Tenkan = 5
- Kijun = 20
- Senkou Span B = 52
As a result, you will have the data changing more dynamically, but this is not always better. Anyway, you should test the changed parameters and compare them with the default values. Only after that, you can decide.
How Ichimoku Cloud Works in Forex Trading: Signals & Strategies
Let us cover the Ichimoku forex trading strategies
The Ichimoku indicator allows a trader to take a comprehensive approach to market analysis. It indicates the current short-term trend, the medium-term trend, and the long-term global trend.
So, using the Ichimoku cloud, you can build a Forex trading strategy that will successfully work in any timeframe. Besides, you can easily ichimoku indicator free download.
There are many trading systems based on the Ichimoku forex signals. I will cover the top Ichimoku trading strategies and how to interpret ichimoku cloud. I will also demonstrate how to trade with ichimoku kinko hyo.
Patterns of Tenkan and Kijun lines
Traders usually consider signals created by the Tenkan and Kijun lines in two cases:
- When the lines cross;
- When the lines are facing in the same direction.
Tenkan Sen / Kijun Sen Cross
When the Tenkan line crosses the Kijun upside, there is a Golden Cross pattern. This is a buy pattern.
When the Tenkan line crosses the Kijun downside, there is a Dead Cross pattern. This is a sell pattern.
Based on the market situation, the above patterns may signal the trend continuation or correction. They should be taken into account, but they are not the strongest signals, so, I recommend trading according to the patterns that are consistent with the general trend. To trade in the correction, i.e. counter the trend, there should additional confirming signals.
How to trade the Tenkan and Kijun crossing? You can enter a trade once the signal bar closes in the free ichimoku charts. A stop loss is set beyond the next local high or low. Another option is to enter a trade at the breakthrough of the local high or low in the direction suggested by the signal (i.e. if it is a buy pattern, you enter when the price breaks through the local high).
There is no universal entry rule. You should make a decision according to the particular market situation and your personal trading style.
Kijun and Tenkan alignment pattern
Kijun and Tenkan's alignment in the same direction means that the local and middle-term trends are the same, which suggests entering a trade. You should also analyze the long-term trend when you want to enter a trade based on the alignment of the Ichimoku Kijun and Tenkan lines. The long-term trend must confirm the idea to buy or sell a trading instrument.
You can enter a trade immediately after a trending movement starts when the lines have located in the same direction. You can also enter a trade in the middle of the trend, but, in this case, you’d better expect a correction or the test of the red or the blue line or the zone that is created between these lines.
Senkou Span A/Senkou Span B patterns
Signals sent by the Senkou Span lines and the cloud they create. The Senkou span A and B lines could be the support or resistance levels, depending on the trend. The Senkou Span A is a less important level, the Senkou Span B is thought to be stronger, it marks the border of the long-term trend.
The cloud’s color changes when the faster Senkou Span A crosses the slower Senkou Span B, and so, there are early signals of the trend reversal. Therefore, entering a trade after these lines cross will be at the inceptive stage of a new trend. Here is the example of trading signals occurred when the cloud’s color changes:
I recommend entering a trade after the Ichimoku cloud has changed the color. A Stop Loss, in a perfect situation, is put at some distance from the cloud. Note that the new cloud forms 26 periods ahead, so pay attention to the moment when the signal to buy or sell the pound was formed in the above screenshot.
Senkou Span Cross
There is another signal, a leading one, when the price breaks out the Senkou Span B. Differently put, it is an ichimoku uptrend cloud crossover. The line itself is a dynamic level and marks the trend border. Therefore, if the outer border is not broken, the trend is likely to continue. If the price breaks through the filled zone, the trend should reverse soon.
Let us study the examples of the rebound and the breakout of the Senkou Span B line. I recommend you to pay attention to the breakouts and the price further movement:
Kumo Breakout
When the price is trading within the filled area, the cloud, it means there is forming an accumulation zone or flat. When the price is trading flat, one should enter trades at the borders of the range, and this trading strategy is not as simple as trading with the trend.
To have a more or less wide trading range, you need to expect cloud expansion and spot ichimoku cloud buy singlas. It is not always relevant to enter trades when the price is within the Ichimoku cloud.
Trading in the range suggests entering trades in the direction of the Senkou Span B when the price breaks out the Senkou Span A. When the price reaches Senkou Span B you should be trading in the direction of the first line and so on.
I do not recommend one to use limit orders or enter a trade immediately after the price breaks out the Senkou Span A. First, the breakout could be false. Second, the range within the cloud usually doesn’t allow entering on the breakout with an acceptable Reward/Risk ratio (2/1 or more).
Tenkan and Kijun in the Ichimoku cloud are still strong levels. It is safer to enter trades at the levels around these lines.
The above screenshot displays two different cases. In the left figure, the price was trading between Span A and Span B. In the right one, the Tenkan and Kijun were also used as strong levels.
Trading inside the cloud is employed by professional Ichimoku traders who know what they do. To detail the entry point, they use shorter timeframes and the Japanese candlestick patterns to supplement an ichimoku cloud strategy. I do not recommend newbies to trade in the cloud, as this trading strategy is quite difficult. Beginner traders should first master trading according to simpler and stronger signals described above.
Chikou Span Cross
As I wrote earlier, the Chikou Span serves as an oscillator in the Ichimoku trading system. Therefore, the first thing you should pay attention to is how the price has deviated from the green line. A wide gap between the oscillator and the current price means there should soon start a correction opposite to the main trend.
If you witness such a situation and the Japanese candlesticks generate an additional pattern to buy or sell counter the major trend, you can use this important signal and trade in the direction of the correction.
Another important signal within an ichimoku strategy appears when the Chikou Span crosses the price chart. When the Chikou Span line crosses the price chart from below, this is a buy signal. If the Ichimoku Chikou comes from above, this is a sell signal.
You should remember that the oscillator is projected back 26 bars. Approximately as many days, according to the Ichimoku tool developer, large traders need to accumulate the position before the further strong move.
In the above example, the bar marked with a purple vertical line marks the point where the Chikou span breaks through the price chart either upside or downside. The orange line marks the bar that generates a buy or a sell signal, accordingly. The pattern appears quite seldom in ichimoku charts, but it is a strong signal in the Ichimoku trading strategies.
All the lines are arranged in the same direction
When all the indicator’s lines are facing in the same direction, there is a strong pattern that suggests entering a trade in the trend direction.
We see from the examples that the Ichimoku cloud, the Tenkan sen and Kijun sen are directed in the same direction, which indicates the entry direction.
Signals summary
As you can see, there are quite many patterns generated by the Ichimoku indicator. How to read ichimoku cloud? At first, it can be difficult for a beginner to figure out which signal is delivered by a particular combination of lines and clouds. What trade should you enter according to a signal? How much time should you hold the trade you enter?
I have made a classification of Ichimoku strategy signals to help you in future.
Note: Spot the signals in the daily timeframe.
|
Signal |
Direction |
Trend/note |
|
Golden Cross |
bullish |
Short-term |
|
Dead Cross |
bearish |
Short-term |
|
Tenkan and Kijun face up |
bullish |
medium-term |
|
Tenkan and Kijun face down |
bearish |
medium-term |
|
Orange cloud |
bullish |
Long-term |
|
Purple cloud |
bearish |
Long-term |
|
The price breaks out Senkou Span B |
bullish/bearish (according to the breakout direction) |
It is an early signal. You need additional confirming signal to buy or sell |
|
Price is inside the Ichimoku cloud |
Flat |
Middle-term. You need to trade at the edges of the cloud according to the Price Action signals or candlestick patterns |
|
Price is far from Chikou Span |
Counter-trend |
Trade in the long-term correction |
|
Price breaks out Chikou Span from below |
bullish |
Long-term |
|
Price breaks out Chikou Span from above |
bearish |
Long-term |
Japanese candlesticks in the Forex Ichimoku trading system
Ichimoku Sanjin stressed the importance of using the Japanese candlestick analysis when trading the Ichimoku signals. Without analyzing the patterns generated by the Japanese candlesticks, the probability that the trade entered according to an ichimoku strategy will be successful is about 60%-70%. However, if professional trades apply the analysis of Japanese candlesticks as an additional filter, they can reach an 80% chance of success or even more.
Here, the Ichimoku trading strategy becomes more complicated, and you will have to miss some signals. However, if you practice the candlestick analysis, you will achieve better results as you will cut the potential stop loss size, detail the entry point more accurately and exit the trades on time.
I recommend you to confirm your trading ideas to buy or sell within any ichimoku strategy employing the signals delivered by simple candlestick patterns. You can also employ Price Action patterns. You do not have to learn and trade all the patterns.
Three or five most common price patterns will be enough, provided you use them often. After all, an indicator is just a derivative of the price movements, and the price chart is always primary. Only the price movements indicate the real market situation.
I covered in detail the most important price action patterns in the previous educational article, Price Action Forex strategies.
Ichimoku trading strategy
Let us study a real example of trading with the Ichimoku indicator. The Ichimoku Kinko Hyo download indicator is a kind of independent trading system. So, we won’t employ any additional filters or analytical tools. We should trade according to the signals described in the article.
I will try to demonstrate a simple Ichimoku mq4trading strategy. It is a medium-term trading strategy, so it may take quite a long time to hold the trade until there is a profit.
We shall not trade all the signals. Concerning this ichimoku strategy, I will cover only the simplest patterns for a beginner, such as the Golden Cross and the Dead Cross. A good not necessary entry condition is Kijun and Tenkan's alignment in the same direction.
Primary condition, we shall strictly follow are:
As Ichimoku is a trend indicator, we shall trade only with the long-term trend, which is indicated by the cloud’s color. The orange cloud signals buy entries, the purple cloud signals sell trades.
A stop loss shouldn’t exceed reasonable limits. If it is greater than the weekly ATR, we won’t enter such a trade. We are going to trade in a calm market. What does it mean? It means that, following sharp price movements in the daily chart, we shall expect the moment when the market goes back to norm.
After the price hits significant extremes in the daily chart, we should move the trade to the breakeven.
A stop loss will be set either beyond the Kijun sen and Tenkan sen or beyond the cloud, according to which is closer to the entry point. In exceptional cases, a stop loss is placed beyond the nearest local high / low if the Tenkan Sen and Kijun Sen lines are too close to the current entry price.
Reward/Risk ratio will always be 2/1. So, the potential take-profit is twice as big as a potential stop-loss. This makes it easier to set the target profit.
So, I open the first position on gold (XAUUSD) according to the Ichimoku strategy on December 27 2019. All indicator settings are standard. You see from the below screenshot the chart drew a golden cross pattern to buy on 12-13 December. However, the cloud indicates a long-term downtrend. Next, I do the following. I expect until the cloud goes orange, i.e. the long-term trend turns up. If the golden cross pattern is still relevant, I entered the trend.
Some time later, the price breaks through a significant high, the high of September 2019. I move the trade to the breakeven.
A day later, the trade is closed by the take profit.
Based on ichimoku charting, I enter the next trade on gold in six weeks. There is a long-term uptrend, according to the orange cloud. A golden cross forms on February 14. I open a buy position.
The price breaks through the local high, I move the trade to the breakeven.
A few days later, the trade is closed by the take profit.
Now, I will demonstrate to you examples of the high market volatility. According to rule 2 of the trading system, we shouldn’t enter trades in a highly volatile market, as the stop-loss exceeds an average weekly price change. 700-800 is a very high value for a stop loss. We shall expect until the market stabilizes.
I miss another trade after the long-term reverses up again. The price jumps back to the price levels, recorded in the February-March period 2019. Here, I don’t enter a trade because the size of the potential stop loss is not appropriate.
I enter the next trade in the long-term uptrend after three months of waiting.
The position is closed with a take profit by take profit. I forgot to make a snapshot when I closed the trade, so I made it at the time of writing.
As you see, it is quite simple to trade with the ichimoku kinko hyo cloud. I demonstrated you a simple trading strategy based on two Ichimoku signals, the Golden Cross and the Dead Cross patterns. These signals must correspond to the ongoing global trend, as Ichimoku is first of all a trend indicator.
If you trade only these two patterns, you will receive quite a few signals for instruments in a year. However, the signals will be very accurate. If you want to enter more trades, you should learn other Ichimoku patterns and trade more financial instruments.
The most important rule is that you shouldn’t enter trades counter the trend and when the market volatility is very high. You’d better wait for some time and even miss a trade than take an unreasonable risk of a loss.
Conclusion and a trader opinion of Ichimoku Kinko Hyo
The Ichimoku Kinko Hyo indicator is the most complicated tool among standard momentum indicators included in most trading platforms. This is a free indicator, which is an advantage.
Although the Ichimoku signals seem complicated to read, any trader can understand the Ichimoku indicator.
Of course, I recommend all traders to study and use in practice this powerful technical tool. Basically, it is a complete trading strategy suitable for all investors. It considers trading with the trend, flat, and trading in the correction.
If you are a newbie, I recommend you to start studying the Ichimoku indicator and strategies trading with a long-term trend. When you go through this stage and gain more trading experience, you can employ other patterns as well.
Do not forget to confirm your trading ideas to buy or sell with candlestick patterns. This will allow you to be more confident when making trading decisions and get a better Reward/Risk ratio. I think using a Price Action Forex strategy when you consider entries at the key levels will help you increase the final profit.
It can take you quite a long time to master the Ichimoku trading system, but it is obviously worth studying, as the chance of a win is about 80% when you learn to employ all the capacities of the Ichimoku indicator.
The Ichimoku indicator is available in the MT4 platform for free and is one of the built-in indicators in it. I recommend using LiteForex online platform in the beginning of your journey as a trader - there the Ichimoku indicator is also one of the built-in ones.
You could also read the review of my colleague here to learn the behavior of the Ichimoku indicator on the cryptocurrency market.
I wish you successful trading. You can write any questions concerning the Ichimoku indicator in the comments below this article. I will be glad to answer.
With respect, Alex Rodiоnov.
Ichimoku Cloud FAQ
The Ichimoku chart is made of five lines, each of them has a strict mathematical justification and reflects one of the characteristics of the current trend.
1. Tenkan sen indicates the trend direction, the sharper the line, the stronger the trend.
2. Kijun sen projects the future market moves. If the price is above the line, the market is likely to go up, and vice versa.
3. Senkou A and Senkou B make up the so-called cloud, defining the market volatility. When the price is within the cloud, the market is going sideways.
4. Chikou Span delivers signals to buy or sell. If the Ichimoku Chikou line breaks out the price chart upside, buy; if it breaks the price chart downside, sell.
The Ichimoku technical tool is a leading indicator, it can be used to anticipate the market situation in the medium-term and long-term outlook. Senkou Span A and B lines are leading and form the Ichimoku Cloud. The clouds projected into the future give clues on possible movements of the trend.
The Ichimoku cloud is a popular indicator among traders who trade in various markets, in forex, stock market or cryptocurrency. The primary benefit of the indicator is that Ichimoku is a complete trading system that analyzes different trends (short-term, medium-term, long-term) and generates many signals, to trade both in the trend and in the correction. The indicator seems quite complex, but if you study it in detail, you will understand the signals and make a thorough market analysis.
The Ichimoku indicator is a complex indicator which could serve as an independent trading system. It doesn't require any additional indicators. If you wish, you can add an indicator of futures volumes and an indicator of Price Action patterns for better detail of entry points.
Ichimoku performs the best in the weekly and daily timeframes. In fast markets, you can use the Ichi cloud in the four-hour timeframes. The best time frame for ichimoku kinko hyo starts from D1. I do not recommend trading in the timeframes shorter than four hours. You can use default customs in weekly and daily timeframes. In shorter timeframes, you will have to custom ichimoku indicator mt4 parameters and experiment with the variables’ values.
The Ichimoku technical indicator was developed by Goichi Hosoda in the 1930s. The Ichimoku indicator is in the standard list of tools of most trading platforms. The Ichimoku is quite popular among position traders. All those indirect evidence suggest the indicator be reliable. If you are not confident, you can test the Ichimoku trading strategy on a demo account, or test ichimoku strategy for intraday trading on a real account with a small deposit.
The Ichimoku indicator is not so good for intraday trading. It performs the best in middle-term and long-term trading. This is because the indicator developer, Goichi Hosoda, put in the settings of the main lines the number of working days per month in the Japanese financial markets. Other parameters in the settings are also based on the number of working days. If you want to use the Ichimoku for day trading, you will have to change the standard settings and adjust them to the shorter timeframes. There are other technical tools that will perform better than ichimoku cloud day trading.
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