The trading strategy based on the Ichimoku indicator was one of the first trading systems that gained great popularity among traders around the world. In this, she was helped by the complexity of the approach and the simplicity of identifying trading signals. Simply put, it had everything: how to analyze the market, when to enter it, where to exit. It arose in the 60s of the last century, and became widespread in the 80s, when there was a sharp surge in demand for software. This was facilitated by the emergence of the first banking electronic networks, using which it was possible to trade not through voice commands, as it was before, but by giving commands through the trading terminal.
The technological leap gave ordinary people the opportunity to work in the financial markets, which is why the mass of the people rushed to read books on Forex, on stock trading, the main economic theories that were created by Wall Street sharks not only began to rise again. So, for example, the wave theory of predicting events in the market has become widespread. It was at this moment that the Ichimoku indicator received its electronic display, which became the basis of an effective trading system, which immediately gained great popularity among private traders due to its simplicity and efficiency.
Before considering the Ichimoku indicator, how it works in general, what elements it consists of and what it is capable of, it would not be superfluous to make a brief digression into the history of its creation. The name of the trading strategy comes from the name of its author. To be more precise, even from his pseudonym - Sanzhin Ichimoku. The real name and surname of the inventor is Goichi Hosoda. This is a Japanese analyst and practicing trader who first asked himself the question of creating an ideal trading strategy back in the 30s of the last century. Then, for the next 30 years of his life, Hosoda continued to improve the created analysis tool in every possible way and only in the 60s published the results of his creation.
The created system immediately found a lot of fans, the number of which grew exponentially every day. This popularity is due to two simple factors:
- the Ichimoku system consists of moving averages already familiar to everyone, so its structure was close, extremely close for understanding by everyone who had at least some relation to the financial markets;
- The Ichimoku indicator always clearly informs when to enter, where to exit, where to put a stop loss, and where to take profit.
To understand how to use the Ichimoku indicator, you need to take into account that a well-known Japanese analyst developed his trading system for a specific financial instrument. We are talking about the stock index, which is called the Nikkei in Japan, and the author recommended using his brainchild strictly on weekly timeframes (W1), which, on the one hand, made it possible to enter the market not very often, and on the other hand, it gave an excellent opportunity to get into powerful price movements. which brought in very large profits. And, besides, the higher the scale of the graph, the less noise, which means that the analysis is easier and the chances of an erroneous result are significantly reduced.
It is very important to note here: despite the fact that the author himself was guided by the specifics of weekly charts and indicator settings in trading terminals, whether it be Meta Trader 4 or Meta Trader 5, or some other platforms, by default they are made specifically for large timeframes, with If desired, the Ichimoku indicator can be "accelerated". This will allow you to use it effectively in days (D), hours (H) and even minutes (M). Below we will consider the classic version and Ichimoku settings for weekly timeframes, but below we will also present an effective version and ready-made settings for one-day time periods (D1). Having studied this material, it will be possible, by analogy, to reconfigure the indicator even for minute charts.
We have already briefly discussed the integrated approach, which is a characteristic feature of the Ichimoku system, and now we can consider in more detail what opportunities it opens up for the trader. So, three main advantages that will help you understand why it is so important to understand what the Ichimoku indicator is, how to use it to get big profits, paving the way for your own financial independence.
- The first information that immediately gives a first glance thrown at the Ichimoku indicator is the definition of a trend. Due to this property, there is no need to use various additional trend indicators, and given that Ichimoku is superimposed directly on the price chart, this is a great advantage. It consists in the fact that the price chart does not narrow, being forced to share space on the monitor with charts of technical instruments, but retains maximum clarity, allowing the trader to focus on the main thing - on an objective analysis of the current market situation.
- Another important property is the determination of support and resistance levels. Considering that the Ichimoku indicator was intended for large timeframes, this made it possible to immediately see a certain price channel, eliminating the need to additionally analyze the price chart, draw lines based on the opening and closing points of candles, and so on.
- According to Ichimoku, signals appear both up (Buy) and down (Sell). Moreover, it generates them in any kind of trend, even when the market is in a sideways trend (flat). This allows you to make good money, starting from the price channel lines, even when the market is “sleeping”, being in an uncertain position.
At first glance, it may seem that the Ichimoku indicator is something very complicated, because the chart with the price is entangled with various lines, some of which intersect, forming some kind of shaded zones (the so-called Ichimoku cloud). In fact, there is nothing complicated, but the considered technical analysis tool consists of only 5 lines, 4 of which are the Japanese version of the famous moving averages - moving average, and the fifth is an analogue of the Momentum oscillator. As many traders joke, the worst thing is to remember the name of these lines, and everything else when working with the Ichimoku system does not cause any difficulties.
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Paying attention to the 5th line (Momentum), you can again emphasize the convenience of working with the Ichimoku indicator, as the trader will get an effective tool in his hands and does not take up space from the price chart, filling it with additional charts of various technical instruments that hinder more than help when they are used in an amount of 3 or more pieces.
If you attach the Ichimoku indicator to the price chart, you can see that its two lines are shifted forward, ahead of the price chart. These are predictive trend lines, which are a modified version of the classic moving averages (moving average), devoid of their main drawback - lag. Thanks to these 2 leading lines (senkou span A and senkou span B), a trader can look a little into the future, anticipating a trend fading or an impending correction. Below we consider what the Ichimoku indicator consists of and how it works.
This subparagraph gives the name of the lines of the Ichimoku indicator, but before proceeding to consider their specifics and differences from each other, it is necessary to explain the originality of the approach of the author of the system, Mr. Hosoda. The classic American and European approach to calculating moving averages is to add up the closing prices of trading candles for a certain period and divide by their number, which ultimately gives a smoothed average option used to determine the trend. This allows you to even effectively use Ichimoku for binary options, because the main thing there is just to know where the market is heading.
Hosoda approached the issue of calculating moving averages more creatively than his American and European counterparts, creating a more powerful moving average curve that corresponded much better to the realities of trading, allowing traders to act much more efficiently. The simple secret was that for his calculations, he took not the closing or opening points of the candle, but the middle of its trading range. The practical value of this approach has been repeatedly confirmed over many years of using the Ichimoku trading system, and the most significant lines that the author included in the final version are presented below.
- Tenkan sen (Tenkan sen). On the chart, it is displayed in red, representing the fastest line of the indicator, the first to react to ongoing events. To calculate it, take the last 9 candles. If we recall that the indicator was originally created for weekly timeframes, then 9 candles made it possible to make a statistical cut for the last 2 months. The main purpose of Tenkan Sen is to determine the direction of a short-term trend. In principle, this line alone allows you to work effectively on Forex. To do this, it is enough just to enter the market, following the trend, and when the line is broken, turn in the opposite direction.
- Kijun sen (Kijun Sen). On the price chart, this is the blue line, which is also called the “standard” level. It is an averaging according to the method invented by Hosoda for the last 26 candles, that is, for the last six months on weekly charts. If you use the previous Tenkan line as a trade, following the trend, then the main danger for the trader will be periodic corrections. So, in order to accurately determine them and add them at the end of corrections, increasing profits, you can use Kijun Sen as a support / resistance level, which shows the presence of a strong medium-term trend.
- The next two lines are leading moving averages: senkou span A and senkou span B. The first of these lines is calculated as follows. To begin with, the range between the Tenkan and Kijun lines is taken. It is divided in half, getting an average value, which is then shifted forward 26 periods, which ultimately gives points for plotting senkou span A. This level can also be considered as support for a deep correction, so do not forget about it and use it in case of need. their interests.
The strongest line is senkou span B. It is calculated in the same way as the previous one, but with a forward shift of 52 weeks. If we recall again that Hosoda was trying to develop an ideal system for trading primarily on weekly charts, then 52 weeks is one calendar year. Accordingly, if there is a “rebound” from this line, then we can expect a directed movement towards the “rebound” for another year!!! In fact, senkou span B is the long-term coveted by many, allowing you to make big fortunes.
By the way, if there was no “rebound” from senkou span B, then it doesn’t matter either, because then two scenarios are possible - a reversal or a flat. In the event of a breakdown, we can talk about a trend change, close existing positions and open new ones in the opposite direction, knowing that the entry will take place at the very beginning of the long-term perspective. When the trend fades and the market enters an uncertain phase, you should close existing orders and take a wait-and-see position, understanding that as soon as the market is ready for a new strong movement, the Ichimoku indicator will immediately report this and allow you to enter at the beginning of the emerging impulse.
In addition to the lines, the indicator contains the so-called Ichimoku cloud - this is a shaded area, the very “cloud”, which is the space between senkou span A and senkou span B. Depending on which of these lines is on top, the space between the specified lines is painted over in one from two shades. Usually, when prices go up and senkou span B is lower than senkou span A, the "cloud" gets golden shading, and when it's the other way around, it gets pale brown.
The Ichimoku cloud is the most interesting element in this indicator. The fact is that as soon as the price enters this zone, the trader immediately understands that there is uncertainty on the market and it is better to refrain from trading. The price can “hang out” in this zone for quite a long time, not allowing you to work effectively, so the trader can do only one thing - wait. But the exit of the price from the Ichimoku cloud is always a strong signal, indicating that you can finally safely join the movement, counting on good profits.
The last element of the Ichimoku indicator is the Chinkou Span line, usually displayed in green, which follows the price. If senkou span A and senkou span B run ahead, and Tenkai and Kijun are close to current prices, then Chinkou Span is always behind, being somewhere behind. As already mentioned, Chinkou Span is a 100% analogue of the well-known Momentum indicator. Calculating values for Chinkou Span points is quite simple. To do this, the average closing price of candles for the past period of time is subtracted from the closing price of the current candle. The Ichimoku indicator uses a back-shifted interval of 26 candles, with which the closing level of the current one is compared.
Having mastered what each of the lines of the Ichimoku indicator means, you can consider how to use it in practice to your advantage. All the signals that this wonderful technical analysis tool generates are quite simple and will help you make good money on any timeframes. Below are the most typical situations that a trader encounters using this technical analysis tool. If you wish, you can also read additional literature and watch a video about the Ichimoku indicator, which will help you better understand the various specific points when working with it. From literature in Russian there is a good book by A.Yu. Terekhov titled "Indicator Ichimoku as the basis of a trading system"
- The first type of signals that the Ichimoku indicator gives to traders is the intersection of fast and slow signals. Since there are two pairs of such lines in their system, then, accordingly, traders should expect two types of trading signals:
- Tenkan sen crosses Kijun, if the crossing goes from bottom to top, then you can buy, and vice versa, when the fast one crosses the slow one from top to bottom, you need to sell;
- senkou span A crosses senkou span B - the same pattern: if line "A" crosses line "B" from top to bottom, then the trader opens a short position - to sell, and when this suppression occurs from bottom to top - long - to buy.
The Ichimoku indicator, as the basis of a trading system, is a great way to always “catch” good trends, and it often allows you to enter at the very beginning of an emerging powerful movement, which, of course, guarantees a high potential for possible profits. But, if everything is clear with the buy signals, then you should also analyze the sell signals. There is no need to consider each of them separately, since the exit point will be the receipt of an entry signal in the opposite direction.
For example, if a trader bought a currency when the Tenkan line crossed the Kijun from the bottom up, then he should close this order and open a new one, but for sale, as soon as the Tenkan crosses the slower Kijun from the top down. Not necessarily a signal to exit should be the intersection of the same lines, that is, if a trader bought under the conditions described above, when the Tenkan broke through Kijun, then he can close the position when the Senkou B line crosses from top to bottom with the Senkou A line, and so on. That is, any signal in the opposite direction that Ichimoku will give is a mandatory exit point and a promising position for a new entry into the market.
This exit strategy has one drawback. If the movement was, for example, upward, and then began to fall, but the Ichimoku indicator has not yet given a sell signal, then the trader is in an area of uncertainty, not knowing what exactly is happening on the market now: either the price is making a correction, or a change is being prepared trend, not yet confirmed by a sell signal.
In the case of a correction, the trader waits and then continues to accumulate profits, but in the case when a trend change should occur, the signal delay will force the trader to give away part of his income, which is a rather painful process. Therefore, many analysts advise to study candlestick reversal patterns and close the position as soon as the price chart gives one of them. There are two possible scenarios for the development of events:
- if, nevertheless, the appearance of a pronounced candlestick reversal pattern was caused by a deep correction, then the trader can again enter a position along the trend as soon as there is a rebound from the key lines of the Ichimoku indicator;
- in another case, the trader will keep part of his profit and when the Ichimoku signal for a new entry into the market is already received, he will be able to take an advantageous position in the opposite direction.
Beginners who are not familiar with candlestick analysis can be advised to read Steve Nison's book "Japanese Candlesticks" for mandatory reading, where the essence of this phenomenon is stated in simple language and all the main reversal patterns and trend confirmation are given, which will help to receive more accurate Ichimoku signals, significantly increasing performance. his trade.
Another important point when working with the Ichimoku indicator is how to react to the received signal. What does it mean? For example, Tenkan crossed Kijun and rushed up. Like
everything is clear, you need to buy. This is true, but in most cases, such a moment is already accompanied by a strong price movement, which means that the trader will most likely enter somewhere at its very top, after which a rollback will inevitably follow sooner or later.
It is extremely important to consider this state of affairs if a trader enters with a large lot and may simply not survive a deep correction. Of course, only beginners who are not familiar with the rules of risk management do this, but an experienced trader does not need to endure a price drawdown if the impact of this unpleasant phenomenon can be minimized. To be as efficient as possible, you can do one of two things:
- use a small lot to enter the market, which should be approximately two times smaller than the one that the trader originally wanted to enter;
- first wait for the correction, and then open a position in the direction of the emerging new trend.
With the second case, everything is clear, and the first requires additional explanation. The trader enters immediately upon receiving a signal with a small lot, which makes it possible to already be in the market, but not be afraid for his deposit during a rollback. Further, as soon as it happens, the trader adds a position at the end of the correction and takes a profitable position in terms of obtaining maximum profit.
Like any other trading system, Ichimoku generates signals of different reliability. Accordingly, when you see one of them, you should drop everything and open with the maximum lot, and with the other, you will need to act very carefully. To work with the Ichimoku indicator to bring maximum benefit, you should familiarize yourself with the main situations that are often encountered in the trading process and require additional clarification.
The first group includes the exit from the Ichimoku Cloud. This is the strongest signal that this indicator can give. If we remember that the "cloud" is a zone of uncertainty, when the price makes unpredictable fluctuations, then the exit from it is usually accompanied by an extremely powerful impulse that will push the price in the chosen direction for quite a long time, which means it will allow the trader to enter at the beginning of a new trend and get good income.
Seeing a way out of the Ichimoku cloud, one should not hesitate to open in the direction of a breakthrough, but at the same time, one should not neglect the basic safety rules that dictate: risk management, setting stop losses, and similar safety measures.
When neutral signals appear, you should act with caution, since here you can usually count on only short-term price movement. An example of such a neutral signal can be the crossing of the Kijun line by the Tenkan line from the bottom up, which will occur while the price is in the Ichimoku cloud. That is, on the one hand, there is a clear and reliable signal, on the other hand, the price is in the zone of uncertainty, where it is difficult to give a confident forecast regarding further developments.
How to use Ichimoku in such cases? Is it worth working out the signal or would it be better to stay on the sidelines? Experienced traders give an unequivocal answer to this question - it is possible and necessary to trade, but at the same time, you should remember about some of the main points of working on the Ichimoku indicator. Once in the cloud, the senkou A and senkou B lines should be considered as support and resistance levels, which should become the basis for working in the area of uncertainty. That is, as soon as a signal appears, you can act, but when the price approaches the boundary levels, a reversal movement should be expected, so it is important at this moment to either pull the stops as close as possible, or simply close the deal, fixing the profit, and wait for further developments.
The weakest Ichimoku signal is a recommendation to open a position, at which the price immediately rests against the "cloud". That is, for example, Tenkan stopped Kijun in the direction from top to bottom, which means that it is possible to sell. However, the price is already entering the cloud, which means that we should expect a strong slowdown and further uncertain movement.
The question of whether it is worth working in such conditions should be answered in the affirmative, since the scale of the charts is still quite large, so even after working 2-3 candles, you can still make good money. The main thing is to pull stop-losses closer when entering the cloud and follow the further development of events. If the movement continues, then you can not close the position yet, and when it is already clear that the price movement is fading, you can exit this risk zone either by a triggered "stop" or by visual analysis of the current situation.
As already mentioned, the intersection of senkou A and senkou B is a good signal to enter the market, but it has certain characteristics that are also important to consider in order to make more effective actions in financial markets. Usually, when the faster one (senkou A) crosses over the slower one (senkou B), there is already good movement in the market in one direction or another. Therefore, a trader who is already holding a position can use this Ichimoku signal to add in, and a trader who missed the initial move can enter the market.
But both should first analyze the current situation in order to get the maximum result from opening a new position. The purpose of the preliminary analysis is to determine the price channel and the already established levels of resistance and support, after which it should become clear what to do next. If, for example, at the time of receiving a signal, the price is pressed against the resistance level, then you need to wait with the entry, since for obvious reasons there is a high probability of “running into” a correction. Accordingly, the best place to enter would be to open a position when the price approaches the support level.
Since the Ichimoku indicator is more focused on finding a new trend and following it, it is quite curious for many traders to know what to do when the market is in a flat, that is, makes sluggish price movements in a sideways trend. At these moments, the moving averages also continue to cross, forming trading signals and earning opportunities.
However, in this matter, all experienced traders are unanimous. Signals received from Ichimoku when the market is flat should be completely and completely ignored! However, this does not mean that you should not look for opportunities for profit here. What can a trader do if he has to skip indicator signals. It can bring technical analysis to its aid, since very promising figures are usually formed in the sideways trend: triangles, a flag, and so on. Accordingly, with a price breakdown of the significant lines of these figures, you can make very good money.
Classical trading, when using technical analysis, has established a simple rule: "When making a deal from a line, you need to put a stop loss behind it." Here, the line can mean a support level, a trend, a Bollinger band, some kind of Fibonacci border, and the like. In this case, Ichimoku offers several options for levels from which you can confidently trade, and in order to protect yourself, I recommend that a trader set a stop loss at a distance of 10 points from the line.
It must be remembered that 10 points is only a recommendation. If trading is on relatively small timeframes, where there is a lot of noise, or on pairs with high volatility, then the stop loss should allow you to override random fluctuations and stay in the market. In order to accurately determine this moment, you can use the ATR indicator, which measures volatility. That is, the stop loss can be more than 10 pips - 15 or 20.
When setting stop losses, there are two main recommendations that can be used, depending on personal preferences and expectations. If the signal to open an order is the intersection of Tenkan and Kijun, then it will be possible to set a stop loss in two places - one behind the Tenkan line, and as an alternative - behind the Kijun line. The first option is considered more optimal, allowing you to save part of the income received when the trend changes. However, it does not allow waiting for a deep correction and a more reliable level for setting a stop loss in the Ichimoku trading system will be a point at a distance of 10-20 pips from Kijun.
A similar situation with stops is observed during the breakdown of the "Ichimoku Cloud". The nearest stop loss can be placed immediately after Spankou A, but, as in the previous case, the most reliable is to place it behind the strong slow moving line - Spankou B. That is, the trader has to make a choice between caution and the ability to follow the trend for a long time.
Considering the advantages and disadvantages of setting a stop loss in each of the two cases, the trader can choose the best option for himself at his own discretion. It is extremely important to decide in advance on the preferred choice of risk management in cases where the Ichimoku Expert Advisor is used for work, since the robot will act according to the algorithms embedded in it, which means that in order to obtain the expected result, in some cases, the trader will have to correct the processes that operate a software product for automated trading.
The classic Ichimoku settings, which were proposed by the author of this indicator, are set by default in almost all trading terminals. As already mentioned, this tool was developed to work on weekly charts, so Mr. Hosoda assigned Tenkan Sen a period of 9 candles, Kijun Sen - 26, Spankou span B - 52. The offset for Spankou span A and Chinkou Span is 26 candles.
As promised at the beginning of the article, here are the settings that will show you how to trade the Ichimoku indicator on D1, that is, on the daily timeframe. To do this, select the indicator in the list of trading terminal instruments - "Ichimoku", and by right-clicking on it, activate the context menu, where there is an option "Attach to chart". After confirming this action, an additional window will open with a description of the indicator, where you should go to the "input parameters" tab and apply the following settings: Tenkan sen - 5 candles, Kijun sen - 13, Spankou span B - 34, offset for Spankou span A and Chinkou lines Span must be set at 13 candles.
By analogy, you can speed up the Ichimoku indicator up to its effective use on M5. As the reviews of some traders show, the Ichimoku system is quite efficient on small timeframes and can be used for scalping.
Outcome
As you can see, the Ichimoku indicator is a ready-made trading system that, with proper experience, can bring solid profits to the trader using it. Given that it was developed for large timeframes, where there are few false signals and high income from powerful price movements, studying and testing it is simply a must for anyone who wants to master the profession of a trader and quickly go from a beginner to an experienced and financially independent professional.
Yesterday in my post “About me. How did you get into this business. System and Strategy” I wrote that I accidentally stumbled upon the description of this indicator, which I continue to use now.
Here's the article I found that got me interested:
The cunning simplicity of Ichimoku (Konstantin Ilyushchenko, D` Magazine (D-stroke) No. 04 (88), March 1, 2010)
How “big and kind” Khan plays on the exchange with his own and other people’s funds using the “Ichimoku cloud” and why he regularly withdraws money from a brokerage account
Before the interview with Andrey Khlopin (known in the blogosphere as Khan), I tried to understand the Ichimoku indicator of technical analysis, which he uses so that the questions are not “teapot”, but to the point. I looked at what they write about the indicator on the Internet - it did not give clarity. I looked into Jack Schwager's book on technical analysis - the indicator is not considered in it.
In general, right before the interview, I had a rather poor understanding of Ichimoku. The reason for this, it seems to me, is as follows. As the legend goes, more than 50 years ago (in the pre-computer era), a Japanese named Goichi Hosoda developed an indicator-trading system and formulated a set of rules for making transactions. Ichimoku is translated as "one glance", its full name is Ichimoku kinkou-hyou - "price equilibrium table that can be grasped with one glance". What was the logic of reasoning and how he started building the system is unknown. The final result has been published - the Ichimoku indicator, which is now included in most computer programs for technical price analysis. The formulas according to which the calculations are carried out are simple, but it is impossible to understand their physical meaning, as, for example, with MACD or Alligator. Just as it is difficult for one programmer to understand the text of another's program, it is also easier here to create a heaped technical analysis indicator yourself than to understand someone else's logic - decompile the program in order to get the original ideas from the final result.
Our communication with Khan took the form of an online lesson on February 4th. We talked on Skype (Andrey lives in Arkhangelsk), watched and discussed the same price charts. And when I started writing this interview, listening to the audio recording of our conversation and reviewing the charts, I was inspired by the "cloud", tenkan, kijun and chinkou. Largely due to the fact that Andrey regularly withdraws profits from a brokerage account.
Ichimoku and some of its signals
Ichimoku indicator consists of three lines and a "cloud":
1. Tenkan-sen (tenkan-sen)- this is the average price for nine days (High + Low) / 2. Tenkan shows the direction of the trend. In MetaStock (QUIK) it is displayed as purple lines, in MetaTrader - red.
2. Kijun-sen (kijun-sen)- average price for 26 days. Kijun is an analogue of tenkan, but for a longer period of time. In MetaStock (QUIK) it appears red line, in MetaTrader - blue.
3. Chinkou Span (chinko span)- the line, which is built on the closing prices of "candlesticks" and shifted back by 26 days. Correlates with the price chart. In MetaStock (QUIK) is displayed as brown lines, in MetaTrader - green.
"Cloud" (kumo) consists of lines: Senkou Span A (Senkou Span A) / Up Kumo- the middle of the distance between Tenkan and Kijun, shifted forward on the time scale by 26 days. Senkou Span B (Senkou Span B) / Down Kumo- the average value of the price for 52 days, shifted forward by 26 days. The classic values for the indicator are 9–26–52.
"Dead Cross"- crossing from top to bottom tenkan and kijun. Signal to open a short position. "Golden cross"- tenkan crosses kijun from bottom to top. Signal to open a long position. If the price is in the "cloud" - this is a lateral movement of the market.
Spiritual Approach
- My brain does not accept this combination of lines with offsets of 26 days and the rest. How did you come to Ichimoku yourself?
My path was long and long, I spent a lot of time reading specialized literature and analyzing a huge number of indicators and their combinations. At first, we all use many different indicators at once on the price chart, and we get a funny, but stupid picture. To see the exact moment of entry into the market and the exact moment of exit is not the most cherished dream of every trader? And when I took only Ichimoku, then I had a question: why all the other indicators, if you can use only this one, which shows everything? Before that, I started with mutual funds - a friend once suggested to me: let's, they say, invest in mutual funds. At that time, I was going to buy a car, but as a result, I bought shares of funds with all the money. Then he made good money and then decided to try his hand at stock trading. It was in 2004, at first there was interest: will I overtake the mutual fund, or will it outrun me. It turned out that the market was growing at that time, earned more on the bullish trend and refused mutual funds.
Then Ichimoku did not use, but used moving averages, RSI and the like. There were losses. For myself, I made a big conclusion, which may seem simple: all indicators graphically display the same thing. At one time he was fond of Japanese philosophy, culture, studied their traditions. I learned that there is an interesting, mysterious Japanese Ichimoku indicator. It gave me the opportunity to identify the most important events on the price chart not in the past, but right at the moment of their occurrence. The main thing here is to understand that success in the market is not only material, but also spiritual. Today you can make a profit of 20%, tomorrow 50%, and the day after tomorrow you can “merge” everything. Therefore, for me, for example, the money that you withdraw from the market and spend is considered profit. I live from the market, my goal is to buy something for myself and my family. There is no stupid desire to increase capital. Perhaps this is my trading philosophy.
- The philosophy is that profit is only money withdrawn from the account?
Yes. A good profit should always be respected, appreciated and understood the reason for its appearance. I think that each of us should experience the arrival of "big profit" in order to understand why he needs it. Therefore, money needs to be withdrawn or set aside in another business.
-And how does this philosophy relate to the indicator?
- In 2006, I began to use Ichimoku seriously, which now warns me against serious mistakes. Simply put, when you work hard, stability appears, you begin to understand how to cut off the chances of falling down. It is also necessary to be creative in combination with the basic principles of money management and control over emotions. This is my philosophy with this indicator that controls my emotions.
The indicator itself consists of several lines, the breakdown and intersection of which means something. But this is all nonsense. The main thing is that I have a photographic memory, and the market sometimes repeats and draws on the charts what it once was. Let's look at Gazprom's schedule in the XTick program.
"Cloud" workshop
- I don't have an XTick. This is a lotion to Alor-Trade, isn't it?
- XTick is a good program, and not only Alora has it. It is now used by many other companies. It is designed for real-time technical analysis of prices for Russian stocks and other financial instruments. In XTick, I like the correct display of "clouds", the future is clearly visible. QUIK for me is just a tool for making transactions, and I look at charts in XTick.
- Well, let's look at the S&P 500 chart in MetaTrader.
- Let's. It is difficult for me to tell at once how I trade, I will try to briefly and simply state the essence of my trading system. This is my game strategy. I wait for the price to rise or fall - the slope of the "cloud" will then become 45 degrees. We look at the hourly S&P 500 chart. Overlay Ichimoku with parameters 8–24–48. I use these exact values instead of 9-26-52. The default settings are only suitable for long-term operation. This is the whole difficulty when beginners, mostly working on smaller timeframes than "days" or "weeks", try to use the indicator in question in their trading with default settings. As a result, after a couple of losing trades, disappointment appears and, as a result, another conclusion that the indicator does not work. You see, from January 7 to January 15, 2010, the price was stomping around the "clouds".
- Did you descend from above to the “cloud”?
Yes. Then the leading lines were broken - this means that a trend change has occurred. When the price is near the "clouds", I never enter the market with 100% of my funds (deposit). In such a situation, I can only use 25% of the money and speculate on 10-minute charts. This is an important rule! In fact, I always want to enter the market with full funds, which is very rare - six to eight times a year. That is, the first thing I need is for the price to start moving away from the “clouds”. I love it when the "clouds" descend for a long time - then a figure is formed. The figure of my dreams, which means that the time has come for my work. Yup, the S&P 500 charted up. Around January 28-29 tenkan with kijun showed the "golden cross". This indicates the possibility of a trend change. But I love it when the "cross" begins to form not close to the "cloud", but far from it. Then there is the potential for sharp and rapid growth. If the "cross" is formed near the "clouds", then this signal is not strong in the set of Ichimoku techniques. Here tenkan and kijun crossed on February 1st. Cloud is nearby. This suggests that the upward trend is likely to be weak. Therefore, I will enter the market when the “candle” breaks through the “cloud”, more precisely, when the second “candle” forms above the “cloud”, then I will think about buying.
What are the canonical rules?
- Ichimoku helps to determine the direction and strength of the trend, as well as support and resistance levels. It consists of five lines that give us an idea of the past, present and a little about the future.
Rule of thumb: I never go long when the price is below the clouds. During this time, I can relax and do other things. I make the first purchase for 25% of my deposit on a 10-minute chart. The price should break through the "cloud" from the bottom up. If this happens, then I switch to the 30-minute timeframe. And I buy another 50% deposit. The rule is the same.
And when the price breaks the "cloud" on the 60-minute chart, I invest 100% of the funds. If I feel that the growth potential is large, then I take a loan "shoulder". That's the whole principle, it's simple.
- And other lines, except for the "cloud"?
- For example, a chinko span is a retarded line. It is like an additional signal for me. I am waiting for the chinko span to break through the “candle”, or better, two “candles”. The more candles, the stronger the trend will be. There is a tenkan - a line of rotation, and a kijun - a reference line. They show the direction of the trend, the mood of the market, sometimes I put “stops” on them.
Let's take another look at the S&P 500 index. Now the value is below the tenkan, the "clouds" show a "bearish" trend. Why bother here? Let other people try to find the bottom. And when the price starts to break through the kijun from the bottom up - it is now about 1080 points, I will not even think about the "long". But if I were now in the “short”, then for me this level would be a stop loss.
Someone else's money
- Wow, the "stop" is quite far from the current 1060 points.
We look at the hourly chart, and if we had entered the market correctly, we would have sold when 1086 points were broken - the intersection of the kijun and the tenkan ("dead cross").
And stop loss at 1080 points is normal. A few more hours or days will pass, tenkan with kijun will go lower. This means that the stop loss will also move.
- Do you play shorts?
No. Some traders spend 24 hours in front of the computer, playing both up and down. Therefore, during the fall, it is better to rest. Which is not so bad, because sometimes you get tired of the market. I also have an agreement with clients whose money I manage, that I only play from the purchase.
Are you still managing other people's money?
It all started with friends who began to trust their money. Then people came on the recommendation, there were clients from other cities. To be honest, managing other people's money is not difficult. Responsibility wakes up, which means that more accurate signals come to mind. True, 2008 taught me a good lesson. In August, my friends and I went fishing. Before leaving, I set stop-losses at the break-even level of purchases and left. When I came home, I heard that there was an armed conflict in South Ossetia. Our market is doing well. Bids were placed, but papers were not sold.
Portfolio losses were 20-50%. Clients called, some nervous, some said that we are not in a hurry, you will win back. Someone took the money. Someone then regretted that he took it. Those investors who survived the 2008 crash are now happy people.
- How much money is in management?
The amount is good… Now I take in management the amount of not less than 1 million rubles.
- Do you take a percentage of the profits?
Yes, 15–20%. If the portfolio has grown by more than 50% in a year, I can ask for a bonus. I have enough of my money, and I'm not chasing too much. Therefore, I trade now calmly and more confidently than before. I'd rather go to the market once a month, but that's right, than wait for something incomprehensible.
I do not envy those who have earned and are earning high interest. I usually say about such people: well done! For me, a profit of 50-100% means that I did a good job. Recently I sold Gazprom for 194 rubles. The portfolio was large, with good leverage. This deal gave me a good profit.
- Great selling price!
Then a “dead cross” sell signal was formed. There are no long signals at the moment. The price of Gazprom on the 60-minute chart is below the "clouds", on the 30-minute timeframe the same picture, which means I'm resting. I can easily go in for sports or other favorite thing.
I don’t watch the American market, I don’t watch anyone. I have many acquaintances who say: here, look there, look here, listen to these. I don't see how this can help me. Sometimes I look at the MICEX index - this is an additional psychological indicator of whether it is necessary to enter the market or not.
Index Forecasts
- When did you start buying shares in 2009?
Open the weekly chart of the MICEX index in MetaStock and overlay Ichimoku. I used to look at the RTS index, but due to the fact that it is a currency index, it is not very correct for me. You see the "golden cross" - tenkan crossed with kijun at the end of March 2009. The index value was about 800 points. For me, this was a signal or the first sign that I was starting to trade quietly in the "long". The market is set to go up, a powerful figure has formed, plus I additionally used the parabolic indicator. It also showed a buy signal. Therefore, then he played powerfully with “shoulders” and did not pay attention to any negatives.
I don't see a break in the growth trend yet. The market stopped at the moment where all the power is concentrated. Next week, either there will be a trend change, or not. I'll watch on Friday. Now we have fallen to the tenkan, which is about 1350 points, then there will be support at the level of 1252 points - this is kijun. If we break through the Kijun, then the market will go to the upper edge of the "clouds" - around 1000 points. The market needs to breathe, so I would like to go to 1252 points in order to buy cheaper for the same Gazprom, Lukoil and VTB.
-If the index drops to 1252 and you buy, where is the stop loss?
When I buy, I have an emotional stop loss. “Stop” I put when I need to leave. Usually, when the portfolio is completely in papers, I constantly watch the market, use the “parabolic” or “fractal” exit.
- What "chips" do you trade?
In 2009, I traded Sberbank for a long time, but when it grew to 50–60 rubles, I became afraid of a sharp drop in prices and realized that I just needed to take a break from Sberbank.
This year I decided to trade Gazprom, which is lagging behind the entire market, Lukoil and VTB. Now these three papers are the main ones for me. And, for example, I don’t understand Rosneft, and therefore I don’t trade it. I need a beautiful picture on the chart. I don't follow a lot of stocks. I usually look at 10-12 papers. If there are no signals, I rest. This is normal and calm for me. And when you trade the same stocks, there is a feeling in the bones - a feeling that somewhere here it will unfold: it will rise or fall. I don't buy more than three or four shares. There are long-term clients, they are interested in the second echelon.
At the moment I hold the shares of "Razgulay". I bought it for 42 rubles. (now 52 rubles), I chose because the price moves smoothly and well. I also play Transneft, but there is low liquidity. Last year, I made 27 trades with its shares, of which only one was unprofitable.
- What do you do besides trading?
I like to have a rest on the nature, I go in for sports. But in the first place, probably, I have a passion for cooking. I am constantly coming up with new recipes. Now I'm also into auto trading. So far, everything is going well, but it is difficult to entrust a large amount to a robot. That's like all. I found myself in this world. Active trading brings me a sense of satisfaction. Only the patient find the right path.
ICQ correspondence and purchases
Khan(13:26:59 16/02/2010) Hello! Well, I waited for the first purchase of Gazprom today, I grabbed it in the morning. There is already a profit! Sitting smoking bamboo... waiting for development... what will happen next... everything is according to plan :)
Oligarchist(13:31:14 16/02/2010) Hello, great!
Khan(17:05:35 02/16/2010) Well, the second game was successful too!!! "Gazik" young man!!! *Yahoo* I sent you a picture... you'll see for yourself...
Oligarchist(17:07:15 16/02/2010) Yeah
Khan(17:16:31 16/02/2010) Everything is simple and original… The easier it is for me to trade, the brighter my mind.
Transactions with Gazprom shares in Ichimoku on the chart in XTick
Ichimoku is an indicator represented by a combination of five lines, three of which are moving averages, and two are their derivatives. Ichimoku not only determines the presence, but also provides information about the location of the zones, and also determines the pullbacks of the trend. The Ichimoku indicator was developed in 1930 by the Japanese analyst Goichi Hosoda (pseudonym Sanjin Ichimoku), and presented to the public only in 1960 as a behavior analysis tool. In the QUIK trading terminal, the Ichimoku indicator is represented by five lines on the price chart, two of which form the so-called "cloud" (the range between two lines shaded with a dotted line).
Rice. 1. Displaying the Ichimoku indicator in the QUIK trading terminal
Ichimoku indicator logic
Each of the indicator lines has its own name and construction method and, accordingly, its own different semantic load:
Tenkan - moving average of the median price (Median Price - the sum of the maximum and minimum, divided by two) with a period of 9. In standard form, it is a purple line. Tenkan is the fastest of the Ichimoku lines and shows the current trend with its slope (up slope - uptrend, down - downtrend, sideways - flat).
Kijun - moving average of the median price over a longer period of time (usually 26). Kijun is usually drawn as a red line that indicates the current price direction. So, if the price is above Kijun, then the uptrend is more likely to continue than change. If the price is below Kijun, the downtrend is in force and is likely to continue. If the price crosses Kijun, this is evidence that the current trend is already in question. In fact, the Tenkan Kijun intersection duplicates the logic of the intersection of two moving averages (EMA) of different periods, thereby giving signals to make transactions in accordance with the direction of the intersection.
Senkou Span1 is the first line of the "cloud" and a derivative of Tenkan and Kijun, since it is their average value, shifted forward by the Kijun (26) period. Senoku Span1 is usually displayed in blue and functions as support/resistance for the current trend.
Senkou Span2 is the second line of the "cloud" and the slowest of the indicator lines: its averaging period is 52, in addition, Senkou Span2 is shifted forward by the Kijun (26) calculation period. Performs the function of the second support/resistance line of the current trend. Usually displayed in green.
At its core, the “cloud” formed by the Senkou Span1 and 2 lines is a trend support/resistance zone. And also - an "indicator" of the trend: if the price is in the "cloud" - there is a sideways trend in the market, and if the price is outside the "cloud" - there is a trend in the market (if the "cloud" is at the top, then the trend is down, and if it is below, then it is up) . The color of the "cloud" also indicates the current trend. If the cloud is colored in the color of the first line (blue), then the market is in an uptrend, and if the color of the second line (green) is a downtrend.
Chinkou - a line formed by closing prices of periods shifted back by Kijun (26). Chinkou is usually displayed in brown. If the line crosses the price from the bottom up, this is a signal to buy, if from the top down - to sell.
Ichimoku Trading Signals
The Ichimoku indicator gives the strongest signal if the price was in the "cloud" and left its border. In this case, it is believed that the market has come out of the flat and has become a trend. The transaction is carried out in the direction of this breakdown with a stop order placed behind the second (far) border of the "cloud".
Rice. 2. Trades on the Ichimoku indicator when the price leaves the cloud
It is believed that if the Tenkan, Kijun Senkou Span1 lines are located in series and parallel to each other, then a stable trend has set in on the market. If the price rolls back to one of these lines during the development of the trend, it is advisable to add or restore positions along the trend.
Rice. 3. Trading Ichimoku when the lines touch in a stable trend
Weaker signals will be signals to make deals when the Tenkan and Kijub lines cross (in the direction of the intersection) and the price crosses the Chinkou line.
Rice. 4. Trades on the Ichimoku indicator at the intersection of Tenkan and Kijun and at the intersection of the price and Chinkou
Displaying the Ichimoku indicator in QUIK
Now - about how to use Ichimoku in the QUIK trading terminal. To display the indicator in the program, you should press the Insert key and open the "Adding Chart" window, in which you should select the Ichimoku indicator from the list of available indicators. Then you should click on the "Add" button.
Rice. 5. Adding the Ichimoku Indicator in the Add Chart Window
Upon completion of the specified actions, five indicator lines will appear on the price chart.
Rice. 6. Basic display of Ichimoku
To edit the Ichimoku indicator, press the key combination Ctrl+E and open the "Edit chart settings" window. In this window, select the area containing the indicator and move to the "Parameters" tab, where you can set the display color and parameters for calculating the indicator lines. Changes will take effect after pressing the OK button.
Rice. 7. Editing Ichimoku indicator settings
Conclusion
Ichimoku is a very interesting trading system based on moving averages and shows that even basic indicators can produce very productive trading systems.
Technical analysis indicatorsEverything you need for technical analysis in trading is packed into the Ichimoku indicator: information about support and resistance levels, trend direction and price momentum. Such functionality captivates many traders, but most of them abandon it just by looking at its chart. And here we will analyze the Ichimoku indicator step by step, learn its secrets, and how to use it.
The past is important, and sometimes interesting. Briefly about the main thing:
- The Ichimoku indicator was developed by the Japanese journalist-analyst Goichi Hosoda back in 1930, in order to analyze the Nikkei index;
- The world learned about the Ichimoku indicator only in 1968. He got his name from the author's pseudonym - Ichimoku Sanjin;
- The original name sounds like Ichimoku Kinko Hyo, or "graphic balance at a glance", which may not be the most accurate, but the most understandable translation.
Clear, human description of the indicator
After applying the indicator to the chart, you can generally lose sight of price candles or bars. In order not to get confused, we will analyze the tool into separate elements. It consists of:
- Conversion and baseline- similar to moving averages, but have some differences;
- Ichimoku clouds or Ichimoku cloud- similar to MACD and is the most popular aspect of the instrument, with Japanese echoes in the name.
And now let's consider the description of the individual elements of the Ichimoku Kinko Hayo indicator.
Conversion and Baseline
Like a moving average, they follow the trend and indicate its direction. But here they are built interestingly:
In the example below, the green and red lines represent tenkan and kijun, respectively, and the gray line represents the 9-period simple moving average, which is very close to the conversion line, but does not match it 100%.
What is their meaning:
- Tenkan is the fastest line and indicates the direction of the trend. The steeper it is, the more pronounced the trend;
- Kijun is considered to be support when the price is above it and resistance when it is below it. In other words, bulls and bears are demarcated by this line.
What is the Ichimoku cloud
Ichimoku cloud on the chart looks like a shaded field between two lines. Interestingly, it is similar to the MACD, both in function and in purpose, only built on the chart itself.
What does the cloud consist of:
Senkou Span A and B lines are calculated similarly to the previous two, but have their own period: 17 and 52.
INTERESTING: the period of 52 candles was chosen for Senkou B not by chance. Ichimoku analyzed weekly charts, and 52 weeks is 1 year.
IMPORTANT: The Ichimoku cloud has been shifted 26-periods ahead to correct the lag!
As already mentioned, the cloud, as an indicator, resembles the MACD. What is this analogy about?
TIP: when the price enters the cloud, it is considered as a time of calm or uncertainty. Flat price.
The Ichimoku indicator is primarily a trend indicator, despite the fact that its cloud is shifted 26 periods into the future. This means that he:
- Will work well in a trending market;
- And bad in flat. Although we remember that there is some sideband filter in the form of a cloud here.
Now let's consider where this indicator can be applied:
- Originally developed for the Nikkei index. But, it can be applied to the stock market, Forex currency market, futures;
- Higher timeframes are recommended: daily, weekly chart. But, it is also actively used on intraday time frames: h4, h1, m15, m10, m5, and even m1;
- The recommended settings for the Ichimoku indicator are 9 - 26 - 52. These parameters will work for higher timeframes. For the hourly - minute chart, it is recommended - 8 - 24 - 48.
Signals and how to use them
There are a lot of signals in the Ichimoku indicator and a detailed description of each does not make sense. They just don't all matter. But, they can be placed in the following groups:
- Signals of intersection of the indicator lines with each other;
- Signals of price crossing with lines;
- And the so-called three line signal, when from top to bottom, in a clear sequence go: price, Tenkan, Kijun and Kumo. It signals a strong trending market.
As you can see, if you analyze each intersection of lines and prices, you can easily get lost. But, a few of the most important and strong signals need to be highlighted:
Ichimoku trading strategy
There are many tips on the Internet on how to trade the considered signals of the Ichimoku indicator, but they are “torn off” from one another. But we have a full-fledged trading tool, where everything is very harmoniously connected.
I offer you 2 strategies on how to use the Ichimoku Kinko Hyo indicator.
Conditions for the first trading system:
- Long– the price is above the cloud, and Tenkan and Kijun have formed a golden cross;
- Short– the price is below the cloud, and Tenkan and Kijun formed a dead cross.
In this strategy, we use the Ichimoku cloud indicator as a trend filter and trade after it.
Conditions for the second strategy:
- Long– the price crosses the cloud up and closes above its upper Senkou Span A line.
- Short— the price crosses the cloud down and closes below its lower Senkou Span B line.
Where to put stop loss?
With the opening of the position sorted out. Now we need to set a threshold for losses if the trade goes against us.
In this situation, you need to build on two points:
- We have trending strategies that do not "like" close stops;
- Trading on Ichimoku is not from the level, and we have nothing to “attach” our stop to.
Therefore, we need to place a stop loss using the following systems:
- For the volatility of a stock or currency pair - at least 2 ATR (if you want to know more, read " Position Sizing - Taming Volatility»);
- "Hide" behind the nearest support or resistance level. It should not be too far, but not close either.
- Place clouds behind the Senkou lines.
I understand that the phrases “not too far, but not too close” sound, to put it mildly, not accurate. We focus on 2 ATR. This will allow the price to determine the direction of its movement, and we will be able to expect a decent risk/reward ratio.
Closing a position
A profitable trade must also be able to close correctly in order to get a good risk-to-reward ratio. Let's look at a few options:
- When receiving feedback is the most conservative way. For example, if a long position is opened according to the first strategy, then we close the deal if a dead cross has formed;
- By trailing stop– gradual movement of the stop behind the price. For the first trading system, you can move by the lows/highs of candlesticks, and for the second - by significant rollbacks. For more details see the article " Roll over your stop loss, keep your profit!»;
- According to the established risk/reward ratio- if your stop is 2 ATR, then set a take profit at a price of 6 ATR from the entrance and go for a walk. This is for a 1:3 ratio.
Conclusion
- The Ichimoku indicator is not such a scary tool as it might seem at first. All its elements are well known to us, since they are similar to moving averages and MACD;
- Combining a pair of faster and slower middle lines makes for great trend trading;
- Watch the cloud - it will always indicate the main trend;
- The cloud is an important area of support and resistance;
- When the price enters the clouds, then the market is flat;
- Ichimoku, as a trend indicator, is useless in a price corridor.
The Ichimoku indicator consists of 5 lines, but in this article we have considered only 4. The fifth one is called Chikou. It, unlike the others, is based on the closing price and is shifted back 26 periods. Unfortunately, while preparing the material for this article, I did not see a “worthy” use of Chikou Span.
Therefore, I suggest you unsubscribe in the comments:
- What application do you see for the Chikou line?
- On what time frames do you use the Ichimoku indicator and what parameters do you use in the settings?
It's all. I'm waiting for your comments. Happy trading!
Good to know -
Many novice traders consider the Ichimoku indicator too complicated and do not use it in trading. This impression is created due to the fact that the tool consists of five lines at once, forming different levels and zones. But is this indicator so complicated as to refuse signals, or is the instrument still worth spending time on learning it?
Description and features of the Ichimoku Kinko Hyo indicator
The Ichimoku indicator was developed much earlier than most technical analysis tools: it was created by the Japanese trader and analyst Goichi Hosoda back in the 30s of the last century. Of course, in those years, all constructions were made by hand, and this influenced the appearance of the instrument. After calculating the indicator values using special formulas, the points on the chart were connected by straight lines, therefore, unlike the classic moving averages, the Ichimoku lines have a somewhat “broken” appearance.
The Ichimoku Kinko Hyo indicator consists of 5 lines, each of which is built according to a specific formula:
- Kijun (blue line). To calculate it, at each point, the arithmetic average of the minimum and maximum of the candle is taken, and then the average value of this parameter is calculated for the last 26 candles. In simple words, this is an analogue of the 26-period moving average.
- Tenkan (red line). It is built on the same principle as Kijun, only with a period of 9.
- Chinkou (green line). The line drawn at closing prices, shifted 26 periods back.
- Senkou A (Up Kumo, orange line). Average of Tenkan and Kijun shifted 26 periods ahead.
- Senkou B (Down Kumo, gray line). The arithmetic average of the high and low of each candle for 52 periods, shifted 26 periods forward. Forms a common area in conjunction with Senkou A.
Formula for calculating the Ichimoku indicator
Tenkan-sen=(Max(High,N)+Min(Low,N))/2
where:
Max(High,N) - the highest of the highs for a period equal to N - intervals (for example, N days)
Min(Low,N) - the smallest minimum for a period equal to N - intervals
N - period length
Kijun-sen=(Max(High,M)+Min(Low,M))/2
M - period length
Chinkou Span– Current Close moved back by M
Senkou Span A = (Tenkan-sen + Kijun-sen)
Senkou Span B = (Max(High,Z)+Min(Low,Z))/2, shifted forward by M intervals
Z is the length of the intervals
The Tenkan and Kijun lines, individually and together, work as moving averages, their mutual intersections, as well as intersections with the price chart, give signals to buy and sell. Two Senkou lines form a support or resistance zone, being the first and second levels, depending on the trend.
Installing and configuring the indicator
The Ichimoku indicator is included in the standard MetaTrader 4 trading platform tools package, so its installation is quite simple. It does not need to be searched on the Internet and downloaded from third-party resources, just open the "List of indicators" tab on the terminal toolbar and select Ichimoku Kinko Hyo in the "Trend" category.
Three parameters can be changed in the settings window: the periods of the Tenkan, Kijun and Senkou B lines. Senkou A is calculated from the Tenkan and Kijun values, so it does not have its own parameter in the settings. Chikou is completely dependent on the closing price. The offset of each line is set by default and cannot be changed.
After the tool is installed on the chart and configured, you can proceed to trading on the Forex market.
Trade by Ichimoku Kinko Hyo
Ichimoku is a complex indicator that gives the trader many different signals. Some of them are quite simple, such as the "Golden Cross" that occurs when the Tenkan crosses the Kijun from the bottom up and gives a buy signal. A dead cross, on the other hand, is a sell signal and is formed when the Tenkan line crosses the Kijun from top to bottom.
You can also trade inside the “cloud” formed by the Senkou A and Senkou B lines (it is shaded on the chart). When the market is in a flat (this is signaled by Tenkan, located horizontally), you can open quick scalping trades when the price bounces from one Senkou line and rushes to another.
However, in order to make trading more efficient, it is recommended to open deals on several signals at once, formed from the interaction of the indicator lines with the price chart and with each other.
A simple, but already quite optimized trading strategy for Ichimoku Kinko Hyo looks like this (using the example of opening a buy deal):
- Tenkan line crosses Kijun from bottom to top.
- The price chart crosses both lines in the same direction.
- The price pushes up from the “cloud” formed by the Senkou lines.
The price bounced off Senkou and broke through Tenkan and Kijun from the bottom up
In this case, the indicator gives three signals at once, which increases the likelihood of making a profitable trade. At the same time, no additional indicators need to be installed on the chart, all technical analysis is carried out using one tool.
Despite the complexity of Ichimoku, some professional traders combine it with other indicators. This approach requires more experience and speed of decision-making, however, after some practice, it will not seem too difficult even for a novice trader.
Strategy Ichimoku + Stochastic
Ichimoku is a trend indicator, so it is most logical to supplement its signals with an oscillator filter. Ichimoku works best in conjunction with the Stochastic, since RSI, although a fairly popular indicator, very rarely gives signals, which means that matching readings of two indicators will be even more rare.
In this strategy, the stochastic oscillator will warn the trader against making deals at those moments when the trend has already dried up, and the Ichimoku signal is clearly late.
Sell trades using the Ichimoku + Stochastic strategy are opened under the following conditions:
- The lines on the chart line up in the order Kijun-Tenkan-price.
- The price is repelled from the "cloud".
- Stochastic is not oversold, the oscillator lines are directed down.
The strategy is quite versatile and suitable for trading on almost any timeframe, except, perhaps, M1 and M5. As a trading asset, you can use Forex major pairs, as well as CFDs on gold and silver.
Advantages and disadvantages of Ichimoku Kinko Hyo
Ichimoku is a fairly versatile and effective tool, moreover, it is more time-tested than any other technical analysis indicator. Ichimoku Kinko Hyo can be used to find signals in both Forex and the stock market, as well as when trading cryptocurrencies.
The main drawback of Ichimoku is common to almost all trend indicators - its signals are very often late. Lines built on averaged values show the previous price values in a modified form, but they cannot accurately and timely predict the moment of a new trend development. That is why Ichimoku must be combined with an oscillator, even if it seems that this Japanese instrument has enough signals of its own.
Trading in financial markets involves a high level of capital risk. In order to reduce risks, it is recommended to strictly follow the rules of money management and always set Stop Loss. All decisions that a trader makes while working on Forex are his personal responsibility.