Ichimoku trading strategy
As stated earlier, the Kumo is the combination of the spans A and B, with the area in between them being the kumo. There are many variations in manner of shape and thickness which are related to the price action for the instrument as to how the kumo forms.
When the cloud is thick, this is usually due to strong volatility in the price action which has led to a strong trend. A thinner cloud or kumo generally means just the opposite. Since the kumo represents support and resistance, a smaller kumo means the support or resistance is also smaller. Usually, trading markets are bullish when Senkou Span A is above Senkou Span B and vice versa when trading markets are bearish. Traders regularly search for Kumo Twists in forecast clouds, where Senkou Span An and B trade positions, a sign of potential trend inversions.
The chikou span is additionally called the lagging span and it is used in combination with the current swing in relationship to past price action. It is the current price action on a closing basis, plotted 26 periods back.
If the chikou span during a bullish move has no prior price action above it, then the trend is considered generally strong. It is the opposite for a bearish move. Using the chart below, we can see the purple line line 3 which is the chikou span.
The current or last reading of the chart shows the chikou span has no price action above it. This means there is no resistance nearby in relationship with the current trend and the chikou span to past price action. Ichimoku works great in all markets, not just forex or the Japanese markets. Although it is generally viewed as a trend trading strategy, it is also fantastic and picking up reversals along with future support and resistance levels. There are other components of the Ichimoku Cloud, such as the ichimoku time theory more here , ichimoku wave theory here , and ichimoku price theory here which are considered to be the main pillars of the ichimoku cloud, once you get past its basic construction.
While many traders struggle with technical analysis the cloud is simple and easy to use. Any trader of any skill level can use opening breaks or intraday breaks of the cloud to set up trades.
Traders can even use linger time frame charts to set up swing trades. The risk reward nature of binary options makes them an ideal instrument to use with the cloud. James Ramelli is an trader and options educator at AlphaShark Trading, where he actively trades futures, equity options, currency pairs and commodities.
As one of the moderators of the Live Trading Room, Ramelli educates members on strategies, trade setups, and risk management while trading his own capital. Ramelli holds a B. The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere.
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