Trading with Ichimoku Clouds - Advanced Forex Strategies

Trading with Ichimoku Clouds

Ever since we started experimenting and trading with Ichimoku Clouds, we have been impressed with the results. As the name suggest, the Ichimoku Clouds Forex trading strategy has its origins in Japan. It first came to the fore back in 1969, thanks to painstaking research spanning three decades by Japanese journalist Goichi Hosoda.

A key facet of the Ichimoku Clouds forex trading strategy is the presence of multiple components which make trend identification that much simpler. Thanks to these multifarious indicators pointing towards prevalent market trends, signals can easily be picked up for optimal trading. So whether you are looking for say the momentum of the market, the direction that it is likely to take, or support and resistance levels, you will get a very good idea – that too really quickly, all thanks to the Ichimoku Clouds trading strategy.

With that background in place, it is only appropriate that we look more closely at the components that form the Ichimoku Clouds forex trading strategy.

First there is the Conversion Line referred to in Japanese as Tenkan-sen which is indicative highs and lows over a 9 day period.

Then there is the Base Line referred to in Japanese as Kijun-sen that indicates 26 day highs and lows.

You also have Leading Span A or Senkou Span A that essentially forms the mid-value between the aforementioned Conversion and Base Lines. So as far as the “cloud” aspect of the entire Ichimoku Clouds trading strategy is concerned, Leading Span A leads up to one of its boundaries.

Finally you have Leading Span B or Senkou Span B which looks at the mid-value of a 52-day period, as per the prevalent highs and lows. Leading Span B completes the cloud boundary as referred to in case of Leading Span A.

While these are the primary reference points or indicators referred to in the Ichimoku Clouds trading strategy, there’s also Lagging Span referred to in Japanese as Chickou Span. This reference is indicative of the latest price over a 26 day period.

In most cases, you will only be referring to the first 4 indicators mentioned above.

The chart below gives you a very good idea of the above mentioned Ichimoku Clouds trading strategy line components:

Trading with Ichimoku Clouds
Trading with Ichimoku Clouds

Making the most of the Ichimoku Clouds trading strategy

With the Ichimoku Clouds trading strategy in tow, you can easily trade smartly to reap maximum rewards. Below we look at some of the specific advantages awaiting you with the Ichimoku Clouds trading strategy:

Support and resistance points

The Ichimoku Clouds trading strategy makes identifying support and resistance points that much simpler. For instance, when the market is on an upswing prices will go off the cloud while when there is a downward spiral in the market, prices will in fact get onto the cloud and possibly go further below.

Strength of trades

The Ichimoku Clouds trading strategy is also an excellent means of gauging the strength of market trends; so when Span A goes up, in a direction away from Span B, it is rather apparent that the market is on a robust upswing trend. On the other hand when Span A goes down and yet in a direction away from Span B, you can be certain that the market is stuttering.

Entry timelines

The Ichimoku Clouds trading strategy is also a very potent indicator of entry timelines; with upward trends as described above and the Base Line comfortably poised above the Conversion Line, you are obviously looking at a long haul entry. On the other hand when things are inverse to the above scenario you are certainly in for a rather short entry.

The chart below gives you a very good perspective with regard to the above mentioned advantages of the Ichimoku Clouds trading strategy:

Ichimoku Clouds Strategy
Ichimoku Clouds Strategy

Conclusion

As mentioned in the introductory section, the Ichimoku Clouds trading strategy is meant to be a quick indicator of market positions based on which trades can be placed with acumen. In fact, even at a glance, one gets a very good picture of the overall scenario, so your endeavor as a savvy trader would be to make the most of the Ichimoku Clouds trading strategy at all times whenever suitable.

 

 


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