The best one-eye strategy is a system of technical indicators used to evaluate the market. This unique strategy offers different quality trading signals. Forex trading involves significant risk of loss. In Ichimoku cloud trading, these losses are included and small.
The Ichimoku indicator was published in 1969 by Japanese journalist Ichimoku Kinkou Hyo. This candlestick trading technique has stood the test of time.
The name Ichimoku says a lot about the trading system, or at least gives a description of it.
Ichimoku = “at a glance”.
Kinkou = “balance, balance”.
hyo = “chart, graph”.
Ichimoku cloud trading attempts to identify possible price directions. It helps traders determine the best times to enter and exit the market by providing trend direction. Reliable support and resistance levels and the strength of these market signals.
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Before diving into the details of the Ichimoku Cloud strategy, let’s look at the metrics you need to successfully trade the strategy.
Most popular forex trading platforms use Ichimoku Cloud indicators. The Ichimoku indicator paints all the components needed to better visualize price action. Ichimoku Cloud is one of the most comprehensive technical indicators in modern times. It has undoubtedly become the “go to” indicator for forex traders worldwide.
In the Ichimoku cloud section, we will give you an in-depth overview of the Ichimoku component.
So, before moving on, let’s define all the Ichimoku Cloud components. We examine how to properly interpret the trading signals generated by this technical indicator.
Ichimoku Cloud Explained
Ichimoku Hinko Hyo is a momentum indicator used to recognize the direction of a trend. You can also define precise support and resistance levels. Ichimoku Cloud indicators consist of 5 main components that provide reliable trading signals.
- The Tenkan-Sen Line, also known as the Conversion Line, represents the midpoint of the last 9 candlesticks. It is calculated by the Ichimoku formula: [(9-period high + 9-period low) / 2].
- The Kijun-Sen Line, also known as the baseline, represents the midpoint of the last 26 candlesticks. It is calculated by the formula: [(26-cycle high + 26-cycle low) / 2].
- The Chiou Span, also called the Lagging Span, is, as the name suggests, behind the price. The lagging span is redrawn with 26 periods.
- Senkou Span A, also known as Leading Span A, represents one of the two cloud boundaries and is the midpoint between the transition line and the baseline ([translation line + baseline) / 2]. This value is expressed as 26 periods in the future, which is the faster cloud boundary.
- Senkou Span B, or Leading Span B, represents the second cloud boundary and is the midpoint of the last 52 price bars ([(52-period high + 52-period low) / 2]). This value is expressed as 52 periods in the future, which is the slower cloud boundary.
- The Chikou Span represents the close price and plots back 26 days ago.
Although the Ichimoku Cloud metric contains several different lines, reading the graph is actually very easy. You should use the trend line mentioned above to see if Leading Span A or Leading Span B is currently higher.
When Leading Span A and Leading Span B are identified, the “cloud” component of this graph is dimmed. When Leading Span B is higher than Leading Span A, it indicates to traders that price momentum is currently increasing. In this case, the graph is colored green.
On the other hand, if Leading Span A is lower than Leading Span B, the underlying asset may move in a negative direction. In this case, the clouds are colored red. Despite the complexity of the graph, simply looking at the color of the clouds can help determine the direction of the market.
The basic interpretation of the Ichimoku chart is as follows.
- It is bullish if the price is higher than the cloud.
- If the price is below the cloud, it is bearish.
- When the price is in the middle of the cloud, the trend consolidates or ranges.
Additionally, the Ichimoku charting technique provides bullish and bearish signals of various strengths.
When Tenkan crosses Kijun below, it is considered a bullish signal. When Taken crosses Kijun from above, it is considered a bearish signal. The Kijun line is shown as the red line above.
The strength of Ichimoku trading signals is evaluated based on three factors:
- How far is the price movement relative to the cloud?
- How far is Chiou Span from the cloud?
- How far is the crossover from the cloud?
Because many of the lines on Ichimoku Cloud charts 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 designed to detect changes in support and resistance.
The relationship between Leading Span A and Leading Span B indicates whether there is a strong downtrend or uptrend. Pay attention to the color (green for bullish, red for bearish) and the size of the clouds. If the “cloud” between these lines is small, the trend isn’t very strong.
Ichimoku Cloud is useful for day traders and those who need to make quick decisions. Clouds are often combined with other technical indicators such as relative strength indices to help traders get a complete picture of resistance and support. Many traders look for crossovers to see when trends have reversed.
Ichimoku cloud trading requires a lot of self-discipline. Because you have to wait for the best trading signals. We will use the default settings of the Ichimoku Cloud system.
Now let’s take a step forward and learn how to make money by applying the ichimoku trading rules.
Note * We are not removing the Lagging Span Moving Average from the chart in the future. This is because it is not based on a trading decision because it is behind the price.
Best Ichimoku Strategy – Buying Rules
The Ichimoku Cloud system is designed to keep traders on the right side of the market. Our trading rules will help you follow the trend for as long as possible. At least until it becomes clear that a reversal is taking place. The Ichimoku system is best for swing trading. This is because it maximizes profits while minimizing the risks associated with trading. Here’s how to identify the right swings to increase your profits.
Ichimoku Kinko Hyo Best time slot is the best time slot for you. Because there is no preferred time zone.
This swing trading strategy will teach you how to ride the trend right from the start. You will also learn how to get as much profit as possible.
Ichimoku Cloud Trading: Step by Step
Step 1 Wait for the price to break and go up Ichimoku Cloud.
Ichimoku cloud trading requires prices to be traded above the cloud. Because this is a bullish signal and potentially the start of a new uptrend.
Clouds are designed to highlight support and resistance levels. Because support and resistance are not a single line drawn in sand, we emphasize multiple layers. It’s several layers deep.
So, when we break above or below the Ichimoku Cloud, it indicates a major shift in market sentiment.
High probability trade setups require more layers of confluence before pulling the trigger.
This allows you to meet the following requirements for high probability trade setups:
Wait for Phase 2 crossover: The transition line must break above the baseline.
A price move above cloud demand is followed by a transition line crossover above the baseline. When these two conditions are met, you can start trading.
The Ichimoku Cloud indicator is a very complex technical indicator. This indicator is also used as a moving average crossover strategy.
Now we will present a very simple input technique to the Ichimoku Kinko Hyo trading system.
See below… .
Step 3 Buy after the crossover when the next candle opens.
Long-term trading using the Ichimoku strategy is ideal when prices are trading above the cloud. Our team at the TSG website has taken a more conservative approach. We added an additional confluence factor before starting the trade.
Therefore, after crossing, we buy the next candle when it is opened.
(Note the strong buy signal in the graph below.)
The next important thing to set is where to place your protection stop loss.
See below…
Place the protective stop loss below the step 4 breakout candle.
The ideal position to hide a protective stop loss is below the breakout candle. This trading technique does two important things. Here is an example of Master Candle Settings.
First, you’re significantly lowering the risk of losing big bucks. Second, it helps you trade with the market order flow.
Since this is a swing trading strategy, we try to catch as much as possible in this emerging trend. If a new crossover occurs in the opposite direction, you will want to track your stop loss level below the cloud or exit your position.
The next logic we need to set up for our Ichimoku trading system is where we get our profits from.
See below…
Take profit when the Step 5 Conversion Line passes below the Base Line.
To be satisfied with a take profit strategy, you only need one simple condition.
You want to take profit and exit the trade when the Conversion Line crosses the Base Line.
Alternatively, you can wait until the price drops below the cloud, but this risks losing some of your profits. To gain more, sometimes you have to be willing to lose some.
Note ** The above is an example of a BUY trade using the advanced Ichimoku trading strategy. Use the same rules for SELL transactions. In the picture below you can see an example of a real sale transaction.
(Look for a strong sell signal on the Conversion Line.)
Conclusion: Ichimoku Cloud Explained
The best one-eye strategies are slightly different than what you use when technical down and perhaps most of all. If you are having trouble finding true support and resistance, apply the Ichimoku cloud trading techniques highlighted in this course.
