Trading the Ichimoku Cloud
There is a plethora of technical analysis strategies that any trader can use in order to become as profitable as possible. One of the many problems that new traders, as well as traders that have been in the game many years experience is finding out which strategy works best for them, because market conditions will always change and what works now might not work in the future. Some of the most common uses of technical analysis include the likes of moving averages and the MACD (Moving Average Convergence Divergence), however these on their own isn’t enough to create a strong enough, let alone a profitable trading strategy.
Allow me to introduce the art of trading using the Ichimoku Cloud, which is a chart that is used specifically in technical analysis, which displays support and resistance. It also shows momentum and certain trend directions for an asset. It’s primary objective is to provide the relevant information in as a diagram using a combination of moving averages (the tenkan-sen and kijun-sen) to show the bullish and bearish convergences. Another aspect of the Ichimoku Cloud is the “clouds”, or kumo and these are formed between the spans of the average of the two moving averages, which are plotted ahead of time using the previous highs and lows to map the future plot.
Breaking down the Ichimoku Cloud
Being able to judge the overall trend using the Ichimoku Cloud is simple, when the candlesticks are above the cloud it means the overall trend is bullish. Vice versa, when price is below the cloud it means that the trend is bearish.
Traders who favor the Ichimoku cloud will typically use the “senkou” cloud part, as an area of support and resistance, which plays a key part in any traders strategy. On the chart above, the cloud can provide support levels that are able to be projected into the future, which separates this technical analysis tool apart from practically all the others as it offers a projection into the future as to where price could go. Although it might seem like this technical indicator is like gold, most technical traders will in fact combine multiple indicators to gather as much data as possible, such as the RSI (Relative Strength Index) or the MACD.
With other technical analysis tools, they use past data like previous highs, lows and closes in order to help with the present rather than the future. Despite what people might think, all technical indicators are lagging indicators, and it should be acknowledged.
Learning different technical strategies can be a very arduous task, even for the most seasoned of traders as it can take a lot of time fine tuning as well as finding the right combination of indicators to get the most out of the markets. This is one of the reasons why CryptoSignals has done the hard work for you by taking into account important characteristics of the market, such as price action which refers the movement of a particular asset or security, and excludes the use of fundamental or other technical analysis.
CryptoSignals have improved the way the Ichimoku Cloud works by putting traders in the right place and placing helping traders by giving indicators where to set stop limits. Rather than using the technical indicator as with trading charts like Coinigy, like many traders do, our signals have included other support and resistance levels beyond the tenkan-sen, kijun-sen and chikou span giving you greater clarity and simplicity.
With this software, it scans for certain breakouts and puts the traders in the trade at the right time and takes as much effort away from the trader as possible to make it easier for traders to earn profits.