How To ACTUALLY Use The Ichimoku: The Most Profitable Ichimoku Cloud Strategy
Summary
TLDRThe Ichimoku Cloud indicator is a versatile tool for traders to identify market trends, support and resistance zones, and entry signals. Despite its complexity due to multiple components, understanding its five lines—conversion, base, leading spans A and B, and lagging span—can simplify its use. The indicator projects signals into the future and can replace the need for multiple indicators. A thick cloud signifies a strong trend, while a thin one indicates weakness. Proper use involves confirming signals across components for reliable trading decisions.
Takeaways
- 📊 Ichi-moku cloud indicator is a comprehensive tool that can show market trends, support and resistance zones, momentum, and entry signals, even projecting these into the future.
- 🤔 Many traders underutilize the ichi-moku due to its complexity, but mastering it can reduce the need for multiple indicators on a chart.
- 📈 The indicator consists of five lines: the conversion line, base line, leading span A, leading span B, and lagging span, each with a specific role in analyzing market conditions.
- 🔄 The conversion line represents short-term price momentum by showing the mid-point of the highest and lowest prices over the last nine periods.
- 📉 The base line indicates medium-term price momentum, plotting the mid-point price of high and lows over the last 26 periods.
- 🌐 The ichi-moku cloud, or kumo, is a unique component that projects itself into the future, providing insight into future support and resistance levels.
- 🟢 A green cloud, formed when leading span A crosses above leading span B, signals an uptrend, while a red cloud indicates a downtrend.
- 🔍 The lagging span helps identify trends by comparing current price action with past price action, 26 periods behind the last candlestick.
- 🌀 The thickness of the ichi-moku cloud can indicate the strength of the trend; a thin cloud suggests a weak trend, while a thick cloud indicates a strong trend.
- 🚫 Entering positions should not be based solely on the ichi-moku cloud; multiple components of the indicator should signal a trend change for a stronger signal.
- 💡 The ichi-moku indicator has built-in components to verify and validate its own signals, making it a self-contained and versatile tool for traders.
Q & A
What is the Ichi-moku Cloud Indicator?
-The Ichi-moku Cloud Indicator is a popular technical analysis tool used by traders to identify trends, support and resistance zones, market momentum, and potential entry points for trades.
Why do some traders find the Ichi-moku Cloud Indicator overwhelming?
-Traders may find the Ichi-moku Cloud Indicator overwhelming due to its multiple components, which include five lines and the Ichi-moku cloud, each providing different signals and requiring a comprehensive understanding to use correctly.
What are the five components of the Ichi-moku Cloud Indicator?
-The five components are the conversion line, base line, leading span A, leading span B, and lagging span.
How does the conversion line reflect market momentum?
-The conversion line shows the mid-point of the highest and lowest prices of an asset over the last nine periods, indicating short-term price momentum. When the price is above the conversion line, the short-term market momentum is bullish, and bearish when below.
What is the purpose of the base line in the Ichi-moku Cloud Indicator?
-The base line is used to spot mid-term trends, support zones, resistance zones, and market momentum. It plots the mid-point price of the high and lows over the last 26 periods, offering mid-term support to the price action.
How does the Ichi-moku cloud, or kumo, project signals into the future?
-The Ichi-moku cloud, consisting of leading span A and leading span B, projects itself into the future, providing indications of future support and resistance levels.
What does the color of the Ichi-moku cloud signify?
-The color of the Ichi-moku cloud indicates the trend direction. A green cloud (leading span A above leading span B) signifies an uptrend, while a red cloud (leading span B above leading span A) signifies a downtrend.
How does the lagging span contribute to the Ichi-moku Cloud Indicator?
-The lagging span shows the closing prices 26 periods behind the last candlestick, helping to identify trends and similarities in current price action with past price action.
What is the significance of the thickness of the Ichi-moku cloud?
-The thickness of the Ichi-moku cloud indicates the strength of the trend. A thin cloud suggests a weak trend, while a thick cloud indicates a strong trend.
How can the Ichi-moku Cloud Indicator be used to enter into profitable positions?
-The Ichi-moku Cloud Indicator can be used to enter into profitable positions by looking for confirmations from multiple components, such as the conversion line, base line, and lagging span, in conjunction with the color and thickness of the cloud.
What is the role of the stoploss and takeprofit in trading using the Ichi-moku Cloud Indicator?
-In trading using the Ichi-moku Cloud Indicator, the stoploss is placed slightly below the most recent support zone to limit potential losses, and the takeprofit is set at a 2 times risk-to-reward ratio to maximize potential gains.
Outlines
📈 Introduction to Ichimoku Cloud Indicator
This paragraph introduces the Ichimoku Cloud indicator, a versatile tool used by traders to analyze market trends, support and resistance zones, momentum, and entry signals. Despite its popularity, many traders struggle with its complexity due to its multiple components. The indicator can project signals into the future and reduce the need for multiple indicators on a chart. It consists of five lines: the conversion line, base line, leading span A, leading span B, and lagging span. The conversion line represents short-term price momentum, while the base line indicates medium-term momentum. The Ichimoku Cloud, or 'kumo,' is a prominent feature that projects into the future to show potential support and resistance levels. The lagging span compares current price action with past trends. The thickness of the cloud indicates the strength of the trend, with a thin cloud suggesting a weak trend and a thick one indicating a strong trend. The paragraph emphasizes the importance of using the indicator's components together to validate signals for profitable trades.
🤑 Utilizing Ichimoku for Profitable Trades and Broker Recommendation
The second paragraph focuses on applying the Ichimoku Cloud indicator to enter profitable trading positions and briefly mentions Hankotrade as a broker with low commissions and spreads, offering a Matching Deposit Bonus for new accounts. The paragraph provides a step-by-step guide on how to add and customize the Ichimoku indicator on a trading chart, emphasizing the importance of confirming signals from multiple components for stronger trading signals. It describes scenarios for entering long positions when the price is above key lines and the cloud indicates a bullish trend, as well as using the lagging span for additional confirmation. The paragraph also covers entering short positions when the price and cloud signals align to indicate a bearish trend. The video script encourages viewers to use the indicator's components to verify and validate signals before entering trades, aiming to demonstrate the Ichimoku indicator's utility in various trading scenarios.
Mindmap
Keywords
💡Ichi-moku Cloud Indicator
💡Components
💡Conversion Line
💡Base Line
💡Leading Span A and B
💡Lagging Span
💡Market Momentum
💡Support and Resistance Zones
💡Profitable Entry Signals
💡Trend Direction
💡Hankotrade
Highlights
The ichi-moku cloud indicator is a popular tool among traders, yet many do not use it correctly due to its complexity.
Correct use of the ichi-moku indicator can reveal market trend direction, support and resistance zones, market momentum, and entry signals.
The indicator projects signals into the future, offering versatility by reducing the need for multiple indicators on a chart.
The ichi-moku cloud consists of five lines: the conversion line, base line, leading span A, leading span B, and lagging span.
The conversion line represents short-term price momentum and can act as short-term support.
When the price is above the conversion line, the short-term market momentum is bullish; below it indicates bearish momentum.
The base line reflects medium-term price momentum and offers support similar to the conversion line.
The ichi-moku cloud, or kumo, is the most prominent part of the indicator, projecting itself into the future for support and resistance levels.
A green ichi-moku cloud indicates an uptrend when leading span A crosses above leading span B.
A red leading span B crossing above the green leading span A indicates a downtrend.
The lagging span shows closing prices from the past to identify trends and similarities with current price action.
A thick ichi-moku cloud indicates a strong trend, whereas a thin cloud suggests a weak trend.
Entering a position should be based on multiple components of the indicator signaling a trend change.
The indicator has built-in components to verify and validate its own signals, making it unique among others.
Hankotrade is promoted as a broker with low commissions and spreads, offering a Matching Deposit Bonus for new accounts.
The video demonstrates how to add the ichi-moku indicator to a chart and adjust its settings for better visibility.
The video provides examples of using the ichi-moku indicator to enter into profitable positions with proper risk management.
Transcripts
The ichi-moku cloud indicator is extremely popular, and yet many traders still don’t
use it correctly.
This is because the indicator has many components that can overwhelm traders.
However, if you use the indicator correctly it can show you the trend direction of the
market, support zones, resistance zones, the market momentum, and profitable entry signals.
the indicator even projects these signals into the future, showing us future predictions.
This makes the indicator extremely versatile, meaning that you won’t need to have 5 indicators
on the chart, instead, you can become extremely good at using the ichi-moku by learning how
the indicator works so that you can use it correctly to enter into profitable trades.
Now that we have gotten that out of the way let's start.
The ichi-moku cloud indicator is actually a really uncomplicated indicator if you understand
it’s components, the components of the indicator consists of 5 lines.
The conversion line, base line, leading span A, leading span B and lagging span.
The first component we mentioned is the conversion line.
this line shows the mid-point of the highest and lowest prices of an asset over the last
nine periods.
This means that the line can show us an asset's short-term price momentum.
Here we have added the conversion line to the chart.
As you can see the line mostly offers short-term support.
Like we previously mentioned we can also see that the line reflects the momentum of the
market, whenever the price is trading above the conversion line we see that the short-term
market momentum is bullish.
The opposite is true when the price is trading below the conversion line.
Whenever this is the case the short-term price momentum is bearish.
As you can see the indicator can’t be used well on it’s own since it only shows short-term
trends, so let’s take a look at the components that have been combined with the conversion
line.
A component to spot mid-term trends, support zones, resistance zones, and market momentum
is the baseline.
The baseline is very similar to the conversion line, however as you can see here instead
of showing short-term price momentum it shows longer, medium-term price momentum.
This is because the baseline plots the mid-point price of the high and lows over the last 26
periods.
If we take a look at the baseline we also see that it acts the same way as the conversion
line, offering mid-term support to the price action.
We also see that whenever the price is above the baseline the market will have a bullish
bias and whenever the price is below the baseline the market has a bearish bias.
The ichi-moku cloud, also known as the kumo cloud is the most prominent component of the
indicator, The component also consists of the Leading span A, which is the green line,
and the leading span B which is the red line.
unlike many other indicators this cloud projects it’s self into the future.
This allows you to get an indication of future support and resistance levels.
Whenever the leading Span A, crosses above the leading span B, the ichi-moku cloud turns
green indicating that the trend has switched to an uptrend.
The opposite is true whenever the red Leading span B line crosses above the green leading
span A line, this indicates a downtrend.
The last component of this indicator is the lagging span, which shows the closing prices
26 periods behind the last candlestick.
Using this indicator you can spot similarities in the current price action with past price
action.
By using the lagging span you can also spot trends in the market.
Whenever the price is trading below the lagging span it indicates that there is a bullish
trend in the market and whenever the price is trading above the lagging span there is
usually a bearish trend playing out.
The most common way of reading the ichi-moku cloud is by looking at the thickness of it.
If the cloud is thin this indicates that there is a weak trend, however, if the cloud is
thick it indicates that there is a strong trend playing out.
This way we will also be able to filter out ranging or consolidating markets, from this
we can assume that it’s not a good idea to enter into a position when the price action
occurs within the ichi-moku cloud.
It’s also important to note that the longer the price stays below or above the cloud the
stronger the trend is, and the more resistance or support it will provide.
To enter into a position we will need multiple components of the indicator to signal that
the trend has switched, as you can see here the price crossed below the baseline indicating
that the trend has switched to a bearish trend, however the ichi-moku cloud is green, because
of this the sell signal is weak and it is not recommended to enter into a position based
on it.
Here we see that the price crossed below the baseline, but this time we also see that the
ichi-moku cloud is red, this means that there is now a strong sell signal.
As you can see the same goes for buy signals, whenever the price crosses above the baseline
and the ichi-moku cloud is green the buy signal can be interpreted as strong.
This type of pairing can also be done with other components of the indicator such as
the lagging span.
Thats also what makes the indicator different from others, the ichi-moku has built-in components
to verify and validate it’s own signals.
Now that you know exactly how all of the components work let’s take a look at how we can use
the indicator to enter into profitable positions.
But before that, If you are looking for a broker that has extremely low commissions
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Let’s first add the indicator to the chart, head over to the indicator search tab and
search for the ichi-moku indicator.
Select the indicator made by trading view and add it to the chart.
After that navigate to the indicator settings and click on the style tab, we will be changing
the baseline color to white and change the conversion line color to a lighter blue to
make the lines easier to see.
That was all that we needed to do, now let’s take a look at when we will enter into a position.
As you can see here the price is trading above the conversion line indicating that the short-term
trend is currently bullish.
We also see that the price has crossed above the baseline indicating that the mid-term
trend has switched to a bullish trend.
To validate this signal we will first take a look at the ichi-moku cloud.
Firstly, We can see that it’s green because the leading span A is plotted above the leading
span B line.
If we take a closer look at the ichi-moku cloud we also see that the price is no longer
trading inside it.
As you can see here this was the case, indicating that the market was consolidating and that
there was no strong trend showing us that a bullish breakout has also occurred.
Finally we also see that the ichi-moku cloud is thick showing us that this bullish trend
is strong.
Since all of the components we currently have enabled are signaling that this is a valid
buy entry let’s enter into the position.
We will place the stoploss slightly below the most recent support zone. for the takeprofit
we will target a 2 times risk-to-reward ratio.
Now let’s see how the trade plays out.
For the next entry let’s disabled the conversion line and enabled the lagging span.
Here we see that the price has crossed above the baseline, which shows us that there is
a bullish mid-term trend, however, to confirm this signal we will check the other components
of the indicator, this way we can verify the strength of the signal because we don’t
want to enter into positions based on weak signals.
Here we see that the ichi-moku cloud is green and thick indicating that the trend is strong.
As the final confirmation let’s use the lagging span filter, this line shows us the
closing prices 26 periods behind the last candlestick.
This allows us to see similarities between the current market relative to the earlier
market conditions.
If the price is trading below the lagging span then the strength of the signal will
be considered stronger.
As you can see this is the case here.
This means that all of the components of the ichi-moku are indicating that the buy signal
is strong, so we will enter into the buy position.
We will place the stoploss slightly below the most recent support zone. for the takeprofit
we will target a 2 times risk-to-reward ratio.
Now let’s see how the trade plays out.
We can also enter into positions if the color of the ichi-moku cloud isn’t aligned with
the trend.
As you can see here the price is trading below the baseline.
We also see that the price is trading below the coversion line.
Both of these signals indicate a bearish trend, however this time instead of using the ichi-moku
cloud as a confirmation, we will use it as the entry signal.
When the price closes below the red leading span b line we will enter into the position.
As you can see this occurs here, so let’s enter into the position.
We will be placing the stoploss slightly above the most recent resistance point.
For the takeprofit we will target a 2 times risk-to-reward ratio.
Now let’s see how the trade plays out.
As you can see from these entries the ichi-moku indicator can be used in many ways.
I hope this video could showcase some good ways to read and utilize the ichi-moku indicator.
If you enjoyed the video, please leave a like and subscribe to the channel, if you have
any questions feel free to leave a comment.
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