Ichimoku is a trading system that uses the high-low average of price over a specific period to indicate momentum. The Ichimoku cloud’s border is made up of two different lines: Senkou Span A and Leading Span B. Senkou Span A is the fast Cloud boundary while Leading Span B is the slow Cloud boundary. The two lines are calculated the same way but are plotted 26 periods ahead of time.
If you want to catch the best entry points, you should use the Ichimoku Cloud. This broad indicator is colored red when prices are moving below the Cloud, while green when prices are moving above it. To identify a buying opportunity, simply follow the price movement below the Ichimoku Cloud. It’s that simple. However, it’s not enough to simply use the Ichimoku Cloud as your main indicator. If you’re unable to follow the trend and instead need to look for trends, you can still use the Ichimoku Cloud as a starting point.
Another way to use the Ichimoku cloud is to combine it with technical indicators. In addition to its ability to predict future trades, it can also be used as a support and resistance area. Technical indicators, such as the Relative Strength Index (RSI), should be combined with an Ichimoku cloud strategy to achieve the maximum returns. You should always use the highest quality indicators available and combine the strategy with other tools and strategies to maximize your trading returns.
The Ichimoku Cloud can be used as a standalone indicator or paired with other tools such as Fibonacci retracement and bullish Kijun Sen and Tenkan Sen crosses. Its multiple lines are helpful in framing low-risk trade setups, but in ranging markets, it remains a weak indicator. But, if used correctly, it can be a powerful tool. So, take advantage of it!
As the name suggests, the Ichimoku Cloud indicator shows market weather. Generally, a green cloud indicates a bullish trend. A red cloud, on the other hand, indicates a bearish trend. When prices are above the cloud, they are indicating a bullish trend. Conversely, if they fall below the cloud, it indicates a bearish trend. Similarly, when the cloud’s angle changes, you can expect a trend reversal.
There are two kinds of clouds trading indicator: backtesting and forward testing. In backtesting, the clouds have obvious bearish and bullish trends, but when you are trading live, the clouds do not show the same signals. This is why you should use higher time frames for your Ichimoku cloud strategy. It’s more profitable to trade on higher time frames because of lower noise and more predictable trend. So, what’s the difference?