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Ichimoku Day Trading Strategy | Cloud Trading Explained (For Beginners) - YouTube
Channel: The Secret Mindset
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Hello guys, in today’s video we’ll discuss
about the Ichimoku indicator, I’ll show
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you how to correctly read and take signals
with this indicator and we’ll also see some
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tips on how we can improve our winning ration
by trading the Ichimoku cloud.
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An Ichimoku chart is a trend-following system
with an indicator similar to moving averages.
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Ichimoku is one of the trading indicators
that predicts price movement and not only
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measures it.
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The advantage of the indicator is the fact
that offers a unique perspective of support
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and resistance.
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For most traders, Ichimoku might seem complicated,
but once you get familiar with how to interpret
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the charts you’ll spot great trading signals.
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I’ll try to keep things short and simple,
so we don’t overcomplicate things.
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First, we have the conversion line.
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This is a short-term line also known as the
turning line.
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This signals an area of minor support or resistance.
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So, if you’re all about short term and scalping,
follow the conversion line.
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Second, we have the base line.
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Is also known as the confirmation line and
serves as a signal for support and resistance
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levels on medium term.
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Some traders use base line as a trailing stop
level.
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Then, we have the lagging span, also known
as the lagging line, used for confirmation
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of signals.
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Lagging span can also serve as a support and
resistance level.
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Then, maybe the most important tool of Ichimoku
indicator, we have the Kumo cloud.
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I don’t want to bore you with numbers and
periods based on which the cloud is calculated,
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all you need to know that is formed from 2
lines ( span a and span b), which act as major
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areas of dynamic support and resistance.
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Now that we saw the main components, let’s
see how you should read the Ichimoku indicator:
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As i said before, the conversion line measures
short-term price movement
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• if the market price is above the conversion
line, this suggests a short-term upward momentum
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• if the price is below conversion line,
this suggests a short-term downward momentum
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• an increasing conversion line indicates
an upward trend
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• a decreasing conversion line indicates
a downward trend
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Now, the base line represents medium-term
price movement – also known as the confirmation
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line
• if the market price is above the base
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line, this suggests a medium-term upward momentum
• if the price is below base line, this
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suggests a medium-term downward momentum
• an increasing base line indicates an upward
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trend
• a decreasing base line indicates a downward
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trend
Next is the lagging span.
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This line indicates the big-picture of the
trend (the evolution of the current price
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action in relation to previous price action)
• when lagging span is above the current
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price, this indicates that current prices
are higher than previously, and suggest a
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bullish bias
• when lagging span is below the current
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price, this indicates that current prices
are lower than previously, and suggest a bearish
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bias
• when lagging span is near the current
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price, this indicates a trading range
And finally the Kumo, plotted as a cloud,
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indicates dynamic support and resistance,
based upon price action.
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• the longer the price stays below/above
the Kumo cloud, the stronger the trend is
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• when the cloud is wide, the expected support
or resistance is strong.
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• when the cloud is thin, the expected support/resistance
is weak.
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• you should never trade inside the Kumo
cloud, very important rule
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Now let’s see, how we can trade with Ichimoku
based on what we’ve learned so far:
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The first strategy involves base line – conversion
line crossover, with the lagging line as filter
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The crossover between base line and conversion
line can offer trading opportunities, in a
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similar fashion to a moving average crossover.
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• when fast-moving base line crosses above
the slower-moving conversion line, we have
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a buy signal
• when fast-moving base line crosses below
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the slower-moving conversion line, we have
a sell signal
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We could filter the signals received with
the lagging span, for safer entries.
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Thus, we could only take positions that are
in line with the overall trend.
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• if base line crosses above conversion
line, you would only buy if the lagging span
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indicates a bullish bias.
• if base line crosses below conversion
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line,, you would only sell if the lagging
span indicates a bearish bias.
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Another similar strategy involves the base
line conversion line crossover ( but the filtering
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technique takes the Ichimoku Kumo cloud into
consideration)
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• when base line crosses above the slower-moving
conversion line, above the Kumo cloud, we
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have a strong buy signal
• when base line crosses above the conversion
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line, below the Kumo cloud, we have a weak
buy signal
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• when base line crosses below the conversion
line, below the Kumo cloud, we have a strong
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sell signal
• when base line crosses below the conversion
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line, above the Kumo cloud, we have a weak
sell signal
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Another trading technique involves the Kumo
cloud breakout
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This signal occurs when the price cuts through
the Kumo cloud.
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• when the price enters the Kumo cloud and
breaks its upper wall upward, we have a bullish
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signal
• when the price enters the Kumo and breaks
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its lower wall downward, we have a bearish
signal
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The crossover between span lines forming the
cloud is another trading strategy used by
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traders, in a similar fashion to a moving
average crossover.
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However, we must take into consideration that
the lines of the cloud are projected forward
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by 26 periods.
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• when span a of the Kumo cloud cuts the
span b from the below to the upside, and prices
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are positioned above the Kumo cloud, we have
a strong buy signal
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• when span a cuts the span b from the upside
to the bottom, and prices are positioned below
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the Kumo cloud, we have a strong sell signal
• when span a cuts the span b from the bottom
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to the upside, and prices are positioned below
the Kumo, we have a weak buy signal
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• when span a cuts the span b from the upside
to the bottom, and prices are positioned above
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the Kumo, we have a weak sell signal
All in all, the Ichimoku is an interesting
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indicator, excellent at offering dynamic support
and resistance levels.
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Its main advantage is the fact that is good
at measuring the direction and intensity of
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the current market trend.
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Just be careful and use it in trending conditions,
because during non-trending markets it will
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offer a lot of false signals.
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If you got any value from this, please consider
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this video, as it would help us a lot in the
future.
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Until next time.
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