Ichimoku chart is a powerful trading tool in the technical analysis of financial markets. However, not all investors clearly understand the information and apply indicators when trading. Applying the Ichimoku indicator to investing requires traders to have solid professional knowledge. In the article below, Forex Trading will help you learn more specifically about how to use this indicator.
Ichimoku chart and basic information about Ichimoku clouds
Ichimoku is an independent and reliable indicator. This indicator is preferred by many investors around the world.
What is the history of the Ichimoku formation?
The Ichimoku cloud chart was formed by a Japanese journalist. This is a very popular indicator in the financial market. Ichimoku clouds can be used independently when trading and they are extremely simple to use. Ichimoku gives extremely accurate and clear signals to investors.
In 1935, Japanese journalist Goichi Hosoda and his colleagues perfected the Ichimoku trading system. But it was only in 1969 that Hosoda made the decision to publish it. Up to now, Ichimoku is still one of the most commonly used flexible indicators in the market.
Basic concepts you need to know about the Ichimoku chart
This is a technical indicator used to determine support and resistance levels. Besides, it also measures trends, and momentum and provides forex trading signals for investors. Ichimoku charts can also show bullish or bearish trends in the market. Take a simple example with the Ichimoku cloud, when the cloud changes from red to blue, it is a bullish signal. While changing from green to red is a price reversal warning. Higher clouds show that the market is trading very actively. On the contrary, seeing thin clouds means the market is gloomy and there are few transactions.
The meaning of the Ichimoku cloud indicator every investor needs to know
The Ichimoku chart is recognized as an advanced technical indicator. It provides investors with more useful and accurate information than traditional technical analysis tools. But it does not always provide perfect, completely accurate signals. Ichimoku is a trend-following trading system so there will be a certain delay.
Investors should note that when using this indicator. If at a time when the market trend is unclear, the Ichimoku chart indicator may give misleading signals. Therefore, investors should combine Ichimoku with other indicators to minimize risks in analysis and trading.
See more: Explore Ichimoku – indicator for professionals
What components does the Ichimoku chart indicator include?
The Ichimoku chart indicator is called “the cloud” because it looks like a cloud on the chart. It is built on MA lines and can help you identify price trends as well as support and resistance levels.
Kijun-Sen baseline and Tenkan-Sen conversion line of Ichimoku indicator
Similar to the MA indicator, when the price line is above the Tenkan-Sen line, it means the price is in an upcoming uptrend. If the price line is above the Kijun-Sen line, it means the price is in a long-term uptrend.
Kijun-sen and tanka-sen are both calculated using the formula (Highest price + Lowest price)/2. Note that these Ichimoku chart indicators have natural lags in the form of moving averages. When Tenkan-Sen crosses Kijun-Sen from below, above it can generate a buy signal and vice versa.
Chikou-Span delay line
Using the lag line, we can see whether the price is high or low. The Chikou-Span line shows whether the market trend is up or down. If they cut the price line from below and away from the price line. This is a strong upward trend and vice versa.
Path A and Path B in the Ichimoku chart
Senkou-Span A is considered support or resistance in an uptrend. Or a downtrend, price reacts in these areas. Senkou-Span B is calculated over a longer period of time so the sideways frequency is more frequent. The formula for Senkou-Span A is equal to ( Kijun-sen + Tenkan-Sen)/2
These side zones are a signal that the price has fluctuated strongly and are also the basis of reliable support or resistance zones. The thickness of the clouds on the Ichimoku chart also shows price movements, the thicker the clouds, the stronger the price. When the price line breaks above ichimoku cloud, it creates an uptrend. And when the price breaks below the cloud, it creates a downtrend.
See more: Exness – Trade With The World’s Leading Broker Exness
Strategies when applying Ichimoku Cloud signals
The Ichimoku chart indicator will help investors have a better overview of the balance of the chart. Traders can apply this indicator to identify market trends. This indicator will work best when the market has a certain trend.
Strategy following the signal when the Tenkan-Sen line crosses the Kijun-Sen line
The strategy of following the signal when the Tenkan-Sen line crosses the Kijun-Sen line, it will help investors identify favorable Buy/Sell entry points. The buy signal appears when Tenkan-Sen cuts Kijun-Sen from the bottom up.
And if this intersection is at the top of the cloud, it is a sign of a Buy point. The Sell signal appears when Tenkan-Sen crosses Kijun-Sen from bottom to top and the intersection point is above the cloud. Apply the indicator to the strategy as follows. Investors enter orders according to the signal candlestick, if green, then Buy and if red, then Sell. Stop loss below the signal area if it is a Buy order and above the signal area if it is a Sell order.
The strategy follows the Ichimoku chart signal when the Chikou-Span line crosses the price line
This is an extremely effective strategy when applied. Buy signal when the Chikou-Span line cuts the price line from the bottom up, the Chikou line moves away from the price line. Sell signal when the Chikou-Span line cuts the price line from top to bottom, then the Chikou line moves away from the price line.
Apply the Ichimoku chart indicator when entering orders as follows. Determine the entry point according to the signal candle located near the intersection of the Chikou line and the price. A green candle places a Buy order and a red candle places a Sell order.
The strategy follows the Ichimoku signal when the Senkou-Span A line crosses the Senkou-Span B
These are two important lines that make up the Kumo cloud. Based on the intersection signal of these two lines, you can find an effective Buy/Sell order. Buy signal when Senkou Span A exceeds Senkou Span B from bottom to top. Sell signal when Senkou Span A crosses above Senkou Span B. The color of cumulus clouds changes from blue to red.
Apply the Ichimoku indicator when entering orders as follows. At the green candle near the crossover area, there is a Buy order. And the candle with a bearish signal near the cutoff zone will have a Sell order.
Conclude
To be able to use the Ichimoku chart most effectively, investors need to combine it with many different indicators. Besides, investors need to equip themselves with solid professional knowledge. Let’s join Forex Trading to learn how to apply the Ichimoku indicator to investing right now.
FAQs
Using Ichimoku, can you be sure that the entry point is completely correct?
No indicator can give a 100% correct entry point. Investors need expertise to have the highest probability of placing orders.
Can I use the Ichimoku indicator in combination with TradingView?
TradingView integrates many types of indicators, investors can also use Ichimoku.
Which market should I use when trading?
Investors can apply the indicator in the foreign exchange investment market to all assets.
