The Ichimoku indicator is a powerful tool in Forex trading. However, many traders have difficulty understanding and applying its signals properly. Forex Trading will explain how to Trading Ichimoku cloud in detail and specifically.
What is the Ichimoku Cloud?
Ichimoku clouds are also known as Ichimoku Kinko Hyo. This is an analysis technique from Japan. It is made up of 5 components, 2 of which form a cloud-like shape. Ichimoku Cloud is known as Ichimoku Cloud. This tool combines leading indicators. The purpose is to identify support, resistance, and trend levels, providing potential entry points. The Ichimoku Cloud was created by Goichi Hosoda in the 1930s. The Ichimoku Cloud has become one of the most popular technical analysis tools in trading. This is thanks to its efficiency and flexibility in determining market trends.
What are Ichimoku clouds?
Ichimoku Cloud, or Ichimoku Kinko Hyo, is an analysis technique from Japan. It is made up of 5 components, 2 of which form a cloud-like shape. So people often call this indicator Ichimoku Cloud.
Ichimoku Cloud is a tool that combines leading indicators. The purpose is to help identify support, resistance, and trend levels. At the same time, they provide potential entry points for traders. This is considered an advanced technical indicator, favored by many professional investors.
Ichimoku cloud is considered the most effective as a trend-defining indicator. This is because the majority of components are calculated based on the MA formula. It has helped clearly determine the market trend.
The formation and development of the Ichimoku indicator
Ichimoku Cloud is a technical tool created by Goichi Hosoda. He is famous as a journalist who has had a deep passion for Japanese candlestick charts for many years. After establishing the chart research center, he diligently developed a type of indicator. It can stand alone, is easy to understand, and provides clear trading signals.
Goichi Hosoda discovered and applied moving averages on candlestick charts. The aim is to build a comprehensive trading system. In 1935, he and his teammates perfected the Ichimoku Cloud system. This is a tool that today’s traders know and use.
In 1969, the creator of this indicator decided to share it with the public. Ichimoku is known as one of the most versatile indicators. It is often popular in Japanese Forex trading rooms. Today, it is preferred by many investors in the Forex and cryptocurrency markets.
Structure often seen in the Ichimoku indicator
Kijun-Sen line, also known as the Trend line or Baseline. This is a red line that appears on the price chart. The value of Kijun-Sen is determined by calculating the average of prices over the last 26 sessions.
It is defined as:
Kijun-sen = (Lowest price + Highest price) / 2
This line is one of the five main components of the Indicator Ichimoku trading system. It represents price momentum over long periods. Therefore, the signal it gives is often relatively highly reliable.
- If Kijun-Sen is below the price line: the market is trending down.
- If Kijun-Sen is above the price line: the market is trending up.
See more: Explore Ichimoku – indicator for professionals
What is Tenkan-Sen on Ichimoku?
Tenkan-Sen is also known as the Conversion Line for trading Ichimoku cloud. It is the average price between the highest and lowest price of the last 9 trading sessions. This line is green and is often used as a signal in technical analysis.
Calculation:
Tenkan-sen = (Lowest price + Highest price) / 2
In contrast to Kijun Sen, Tenkan Sen is calculated on the average price of the last 9 sessions. The crossover between the Kijun-sen and Tenkan-sen lines provides important information for investors. The purpose is to evaluate the market and plan for placing buy or sell orders.
Chikou-Span line on the Ichimoku indicator chart
Chikou-Span is the green line on the chart on the trading Ichimoku cloud. Simply the closing price plotted over the last 26 sessions. This line is a lagging indicator. They help traders evaluate the connection between the current trend and the previous trend.
- If the price line is below the Chikou-Span line, the market tends to increase.
- If the price line is above the Chikou-Span line, the market tends to decrease.
- If Chikou-Span touches or is within the price line. This often shows that the market is in an accumulation phase or is likely to reverse.
- When Chikou-Span and price lines overlap, market signals become unclear. This makes investors need to be careful and observe closely during this period.
Senkou-Span A
Senkou-Span A is shown in the picture as an orange line on trading Ichimoku cloud.
Senkou-Span A = (Tenkan-Sen + Kijun-Sen) / 2
Senkou Span A is a line calculated based on the previous 26 sessions. The main function of Senkou Span A is to detect the intersection with Senkou Span B. From there, determine the color and shape of the Ichimoku cloud.
Senkou-Span B Ichimoku indicator
On the Ichimoku indicator, Senkou-Span B is a gray line. It represents the average of the highs and lows of the previous 52 trading sessions. This line is calculated by moving forward 26 trading sessions. Senkou-Span B mainly forms the border for the slow cloud in the Ichimoku system.
Senkou Span A and Senkou Span B play an important role in defining the border.
What are the advantages of trading Ichimoku Cloud?
The Ichimoku indicator can be applied in many different trading markets. It includes stocks, futures, options, forex and indices. Extensive performance data is often available for trader reference and analysis.
Few indicators are capable of providing a quick overview of the resistance line. At the same time, can support one view, while showing momentum and trend. The Ichimoku Cloud serves as a general tool for chart evaluation. Because all the lines and data displayed are correlated with each other on the trading Ichimoku cloud.
The Ichimoku Cloud makes it possible to quickly form ideas and set up trades in just a few minutes. This helps traders easily recognize the direction of price movement and trend strength.
Unlike most other indicators, you usually only get one signal or indicator of a trend and then have to use other indicators to confirm the accuracy of that signal. But through the Ichimoku Cloud, you can confirm the trading trend in a single indicator.
You can adjust the Ichimoku Cloud to suit your preferences. Although Ichimoku Cloud seems complicated when it appears on the screen. But you can remove unnecessary lines. The goal is to create a clearer picture of the data and the most important lines. This can be done through platforms such as MetaTrader 4 or MetaTrader 5.
How to trading Ichimoku Cloud in Forex
The Ichimoku Cloud indicator provides an overview of the balance of the chart. Specifically, traders can use this tool as follows:
How to evaluate the market using the Ichimoku indicator
By discussing the Ichimoku indicator, traders can easily recognize the price trend of the market.
- An uptrend is assessed when the price line is above the Ichimoku cloud.
- A downtrend is identified when the price line is below the Ichimoku cloud.
- When the price stands in the zone of the Ichimoku cloud, no specific trend is identified.
In some cases, traders may find the Ichimoku indicator working effectively. Especially when the market is in a certain trend. However, the price “breaks out”. This makes it difficult for investors to determine the appropriate entry point. Basically to meet the desired Risk: Reward.
Trading Ichimoku cloud when the Tenkan-Sen line crosses the Kijun-Sen line
- When Tenkan-Sen crosses Kijun-Sen from the bottom up, it shows that the Forex market is in an uptrend.
- When Tenkan-Sen crosses Kijun-Sen from top to bottom, it shows that the market is in a downtrend.
- When Tenkan-Sen crosses Kijun-Sen above the Ichimoku cloud, this is a signal of strong buying pressure. On the contrary, when Tenkan-Sen crosses Kijun-Sen below the Ichimoku cloud, it is a signal of strong selling pressure.
Trade the Ichimoku indicator when the Chikou Span crosses the price line
- When Chikou Span crosses the price line from the bottom up. This is a signal for investors to place buy orders.
- Contrary to the above, when two lines intersect from top to bottom in trading Ichimoku cloud. That is the signal for traders to execute a sell order.
Trade the Ichimoku cloud when Senkou Span A crosses the Senkou Span B line
Ichimoku is in one of the following situations. Traders may consider taking buy orders:
- The closing price is above the cloud zone.
- Tenkan-Sen cuts through Kijun-Sen from the bottom up.
- The intersection of Tenkan-Sen and Kijun-Sen is above the Ichimoku cloud.
- The Senkou Span B line is below the Senkou Span A line.
- Chikou Span is placed above the price line.
See more: Exness – Trade With The World’s Leading Broker Exness
If the Ichimoku indicator is in the following situation, investors can open a sell order:
- The closing price is below the cloud zone.
- Kijun-Sen and Tenkan-Sen intersect from top to bottom along the Kijun-Sen line.
- Tenkan-Sen crosses Kijun-Sen just below the Ichimoku cloud.
- Senkou Span A is placed below Senkou Span B.
- Chikou Span is located below the price line.
Epilogue
The Ichimoku Cloud is a powerful and popular technical analysis tool in Forex trading. Understanding and properly applying its signals can be challenging but brings great benefits to the trader. The versatility and effectiveness of the Ichimoku cloud have made it the most popular tool. Hopefully, Forex Trading has helped you better understand trading Ichimoku cloud. At the same time, it helps you apply it to your trading strategy.
Frequently asked questions about trading ichimoku cloud
In what markets does the Ichimoku cloud have applications?
Ichimoku clouds can be applied in many different markets. These include stocks, futures, forex, and cryptocurrencies. This is flexible and effective in identifying trends and trading signals.
Are there things to keep in mind when using Ichimoku clouds?
When using Ichimoku rattan, it is necessary to combine it with knowledge and practical experience about the market. At the same time, it should be remembered that some signals may not always be accurate. That’s why you need to consider carefully before making a trading decision.
How to use the Ichimoku cloud to open buy and sell orders?
Open a buy order when the closing price is above the cloud zone and Tenkan-Sen crosses Kijun-Sen from the bottom up. Conversely, open a sell order when the closing price is below the cloud zone and Tenkan-Sen crosses Kijun-Sen from above.
