----
MAIN ELEMENTS OF ICHIMOKU INDICATOR
-----
1) Conversion Line (Turning Line)
This is a short term line also known as turning line.
This signals an area of minor support and resistance.
If you are all about short term or scalping you must follow conversion line.
----
2)
Base Line (
Confirmation Line)
Serves as a signal for S/R levels for
medium term.
Some traders use it as trailing stop level.
---
3) Lagging Span (Lagging Line)
Used for confirmation of signals.
Can also serve as S/R level.
-----
Kumo Cloud
Cloud is formed of two lines.
Span A - Green Line
Span B - Red Line
These act as major areas of dynamic support and resistance.
------
HOW TO READ ICHIMOKU INDICATOR
-------
Reminder: The
conversion line measures short-term price movements.
If the market price is above the conversion line, this suggests a short term upward momentum.
(Increasing conversion line = upwards short term trend)
If the price is bellow the conversion line this suggests a short-term downward momentum.
(Decreasing conversion line = downwards short term trend)
--------
Reminder: Base line indicates medium-term price movement.
If market price is above the baseline = Medium-term upward momentum (2:44)
If market
price is
bellow the baseline = Medium-term downward momentum (2:50)
* Increasing base line = upward medium trend
* Decreasing base line = downward medium trend (3:01)
-------
Reminder: Lagging span = big picture of the trend
(Evolution of the current price vs previous price action) (3:12)
Lagging span above current price = Bullish bias (3:23)
Lagging span bellow current price = Bearish bias (3:32)
Lagging span
near current
price = Trading range (3:38)
-------
Reminder: Kumo Cloud = Dynamic support and resistance based upon S/R (3:44)
Longer the price stays above the Kumo cloud the stronger the trend is (3:55)
When the cloud is
wide, the expected S/or/R is
strong (4:01)
When the cloud is
thin, the expected S/or/R is
weak (4:07)
*Never trade Inside the Kumo cloud, very important rule!!! (4:14)
---------
HOW CAN WE TRADE WITH ICHIMOKU BASED ON WHAT WE KNOW SO FAR
---------
1) BASELINE - CONVERSION LINE CROSSOVER (AS LAGGING LINE AS FILTER) (4:27)
*Offers trading opportunities in similar fashion to a MA crossover! (4:37)
*when fast-moving base line crosses above the slower moving conversion line , we have
a buy signal. (4:44)
*when fast-moving base line crosses bellow the slower moving conversion line , we have
a sell signal. (4:53)
1) Filer using Lagging Span
*We could filter the signals received with a lagging span, for safer entries.
Thus we could only take positions which are in line with overall trend. (5:03)
*If fast-moving base line crosses above the slower moving conversion line , you would only buy
if the lagging span indicated a bullish bias. (5:12)
*If fast-moving base line crosses bellow the slower moving conversion line , you would only sell
if the lagging span indicated a bearish bias. (5:25)
2) Filter using Kumo Cloud
Another similar strategy involves the base line conversion line crossover (but the filtering
technique takes into account the Ichimoku Kumo Cloud into consideration) (5:32)
*when fast-moving base line crosses above the slower moving conversion line , above the
Kumo cloud, we have a strong buy signal. (5:40)
*when fast-moving base line crosses above the slower moving conversion line , bellow the
Kumo cloud, we have a weak buy signal. (5:46)
*when fast-moving base line crosses bellow the slower moving conversion line , bellow the
Kumo cloud, we have a strong sell signal. (5:59)
*when fast-moving base line crosses bellow the slower moving conversion line , above the
Kumo cloud, we have a weak sell signal. (6:03)
3) Kumo Cloud Breakout
This signals occurs when the price cuts through the Kumo Cloud. (6:18)
- when the price enters the Kumo cloud and breaks its upper wall upwards, we have a
bullish signal. (6:27)
- when the price enters the Kumo cloud and breaks its lower wall downward, we have a
bearish signal. (6:36)
4) Kumo cloud crossover
The crossover between span lines forming the cloud is another trading strategy used by traders,
in a similar fashion to a MA crossover. (6:48)
However we must take into consideration that the lines of the cloud are projected forward
by 26 period. (6:56)
* When a Span A of the Kumo cloud cuts the span B from the bellow to the upside, and prices
are positioned above the Kumo cloud, we have a strong buy signal. (7:09)
* When a Span A of the Kumo cloud cuts the span B from the upside to the bottom, and prices
are positioned bellow the Kumo cloud, we have a strong sell signal. (7:22)
* When a Span A of the Kumo cloud cuts the span B from the bottom to the upside, and prices
are positioned bellow the Kumo cloud, we have a weak buy signal. (7:35)
* When a Span A of the Kumo cloud cuts the span B from the upside to the bottom, and prices
are positioned above the Kumo cloud, we have a weak sell signal. (7:47)
Conclusion
All in all Ichimoku is an interesting indicator, excellent for offering dynamic S & R levels. (7:58)
Its main advantage is the fact that is good at measuring the direction and intensity of the current market
trend.
Just be careful and use it in trending conditions, because during non-trending markets it will
offer a lot of false signals (8:17)