Ichimoku Cloud is an original software system for analysing market from trend. Japanese financial expert Goichi Hosoda found a formula in the 30th year of last century to study a Nikkey index. But for public this indicator was presented in 1968. Author was writing analytical reviews with pseudonym Ichimoku Sanjin, so instrument is called that.
How to enable Ichimoku Cloud in IQ Option trade room
Procedure for starting and configuring an Ichimoku indicator is as follows:
- you need to click on label of technical instruments menu in broker’s trade room;
- you need to select Ichimoku Cloud in opened window with indicators list.
Ichimoku Cloud settings window is divided into two tabs with parameters.
- Basic instrument settings.
Trader can change values of Ichimoku elements, depending on timeframe and/or the way to trade on basic settings tab.
- Conversion line period (Tenkan) is an average between the maximum and the minimum of price in selected period (by default a value of Tenkan is equal to 9).
- Standard line period (Kijun) is a curve similar to Tenkan, only with a longer period (default is set to 26).
- General offset (Chinkou Span) is a lagging curve with a value of 26.
- Cloud’s 2nd line period (Senkou B) is middle line between the high and low of price in period 52.
P.S. Author of indicator did not just select this value for second cloud line. He analyzed the charts with weekly candles. 52 weeks is a year. Consequently, Senkou B shows the average annual value.
- Cloud’s 1nd line period (Senkou A) is average of established periods of Tenkan and Kijun curves (calculated automatically).
- Graphical characteristics of indicator elements (colors and display).
User can change a visual properties of curves (color, size), and turn off display of unnecessary elements on chart thanks to these settings of technical instrument.
Recommendations for indicator setting
Since Ichimoku instrument helped the developer to study weekly charts (standard settings of indicator: 9; 26; 52; 26). Those parameters are more suitable for trading in medium and long timeframes, i.e. from 4 hours to a month.
For relatively small timeframes (from 1 minute to 1 hour) traders concluded thousands of profitable concluded deals in trade methods with following settings:
- fast line period (Tenkan) – 8;
- slow line period (Kijun) – 24;
- cloud’s 2nd line period (Senkou B) – 48;
- general offset (Chinkou) – 24.
Traders adapted the instrument for small timeframes and reduced the lag of indicator signals thank to new settings. Ichimoku has become more responsive to changes in minute or hour market.
How to trade with Ichimoku Cloud indicator
Beginners are afraid of graphic elements number in indicator Ichimoku. At first glance, everything is too complicated. But if you properly understand the purpose of each indicator elements, you can add another useful instrument to your personal trade arsenal. With Ichimoku, you can recognize current trend, get information about resistance/support levels and determine profitable points of opening and closing deals.
Traders can interpret the buy/sell impulses and determine main trend in market thank to indicator Ichimoku. Signals of instrument are divided into three blocks:
- Signals formed from Tenkan and Kijun.
You can get 3 types of trade pulses when using the curves of Tenkan and Kijun.
- Three lines signal allows you to determine the presence and strength of current trend. When there is an upward trend, a trader can observe the sequence of lines on chart, looking from top to bottom: Price – Tenkan – Kijun.
When there is a downtrend occurs, same sequence will be viewed only if trader looks on chart from the bottom to the top.
- Signals-crosses are intersection of curves. You can determine the opening and closing of transactions with help of crosses.
Golden Cross or when Tenkan passes from the bottom up through Kijun is a bullish impulse for buying.
Death Cross is a bearish sell signal: Tenkan passes through Kijun from the top to the bottom.
- Signals from the cloud Ichimoku.
Price crosses a cloud. If price candles crossed a cloud, it means a rapid change in the current trend in the market direction. When price crosses the cloud from bottom to top then the price will rise; when price crosses a cloud from top then the price will fall.
When the candles chart passes within a cloud, than means that now there is a price correction. This is a sign to market participants, to refrain from trade with an Ichimoku indicator.
- Impulses that generate the lagging curve (Chinkou).
Chinkou line informs trader about strength of existing trend: the further the curve from a price, the stronger a trend.
Summary
The versatility and flexibility of Ichimoku settings is really a valuable feature of technical instrument. Here, only general information about the indicator is provided. Before trade with Ichimoku Cloud, you should test this instrument on timeframes with different settings using IQ Option site’s demo account. With this tactic, you can study in detail indicator reactions to market behaviour and save your money.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future
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