3 Profitable Ichimoku Trading Strategies.
In this article I show three strategies using the Ichimoku trading system. In fact, because the system is so versatile, I look at 3 different Ichimoku trading strategies. I then show the results of how these trading strategies perform on the EUR/USD forex pair.
I carried out these analyses to find out how good the Ichimoku system is at identifying trends. The trading strategies are simple and do not require any judgement or special analysis.
Ichimoku Kinko Hyo.
Ichimoku is a trading system that originated in Japan. Developed by journalist Goichi Hosoda, it is designed to help traders identify and trade with the dominant trend. The lines look quite complicated on the chart but they can be easily used as part of an automated trading strategy.
Conversion and Base Line.
The red line is the Conversion Line (tenkan sen) and is the quickest to react. The blue line is the Base Line (kijun sen). The Base Line is slower and is used for confirmation.
Ichimoku Cloud.
The most unusual thing about the Ichimoku is the cloud. The cloud is a slow-moving area on the chart that helps to identify the trend and provides support and resistance.
The cloud is made up of two lines: Senkou A and Senkou B. Senkou A is the fastest and makes the inner edge of the cloud. Senkou B is slower and makes the outer edge.
Chikou Span.
The Chikou Span is the green line. It is made by plotting the closing price 26 periods back.
The Ichimoku Trading Strategies.
All three trading strategies are either long or short. Each trading strategy starts with capital of $100,000. The rules of the strategies are:
Strategy 1: Trade long when the Conversion Line crosses above the Base Line. Trade short when the Conversion Line crosses below the Base Line. Strategy 2: Trade Long when the Closing Price crosses above the Base Line. Trade Short when the Closing Price crosses below the Base Line. Strategy 3: Trade Long when the Closing Price crosses above the Senkou Span B line (slow cloud line). Trade Short when the Closing Price crosses below the Senkou Span B line.
The analysis on this page was carried out using a Tradinformed Backtest Model. These are a great way for anyone to test their own systems. The models are created in Excel and allow you to test different markets, try different indicators and entry conditions. To see the latest models check out the Tradinformed Shop.
The Ichimoku is a fascinating indicator. If you want to learn more about it, as well a lots of other indicators, check out the page about 21 Technical Indicators.
The data used for the backtest is the EUR/USD forex pair on the daily timeframe. The data is tested from May 1992 to December 2014.
The results of the three trading strategies are:
The equity curve of the three strategies combined is:
Conclusion.
All three of the trading strategies were profitable over the 22 year testing period. This is very encouraging because it shows that, over time, the Ichimoku can be useful in all market types.
Looking at the equity curve above it is clear that the strategy performs better when volatility is higher and the trend is strong. The period between 2006 and 2011 was notable for big swings in forex valuation as the dollar alternately weakened and strengthened during the financial crisis. The strategy performs poorly during the period 2011- mid 2014. During this time volatility declined as the world’s central banks became the biggest players in the forex markets.
Overall the Ichimoku is a good way to trade the trends. The 3 different systems showed good profitability over a long test period.
If you would like more information about the strategies you can watch the accompanying YouTube video:
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Ichimoku Strategy.
Combining the 20 EMA with the Ichimoku cloud.
In our price action studies we have focused on trend indicators with the EMA 20 being a key feature in majority of the discussions. This in combination with various price action signals has offered excellent trade entries with impressive risk: reward ratios.
In this article we will introduce yet another powerful trend indicator, the Ichimoku cloud. The Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a versatile indicator that defines support and resistance and identifies trend direction. However we will only use two out of the five elements of this indicator:
Senkou Span A (Leading Span A): (Conversion Line + Base Line)/2))
This is the midpoint between the Conversion Line and the Base Line. The Leading Span A forms one of the two Cloud boundaries. It is referred to as “Leading” because it is plotted 26 periods in the future and forms the faster Cloud boundary.
Senkou Span B (Leading Span B): (52-period high + 52-period low)/2))
On the daily chart, this line is the midpoint of the 52 day high-low range, which is a little less than 3 months. The default calculation setting is 52 periods, but can be adjusted. This value is plotted 26 periods in the future and forms the slower Cloud boundary.
Combining the EMA 20, a lagging indicator, and the Ichimoku cloud, a leading indicator, can augment trend trading.
Let us look at a couple of ways in which the two can be combined:
A: Filtering out low quality Price Action Signals.
In this chart of the EURUSD daily time frame, we can see that a bearsh price action signal occurring below a bullish cloud only yield about 50% of the pips in comparison to a bearish signal that occurs under a bearish cloud. This means a prudent trader would want to decrease his profit target levels for similar setups and increase the targets where the bearish signals occur below a bearish cloud.
In the past we have used Fib levels, pivots and previous S/R levels as trade targets. Notably the Ichimoku cloud can also act as a target. The Senkou Span A and Senkou Span B act as future dynamic support and resistance levels.
In the above example, a bearish pinbar occurred on the EMA 20 just above a bullish cloud. A trade entry and impulsive break to the downside followed for the next 5days. Price is then supported off the Senkou Span B and a bullish run follows. Using this lower end of the cloud in this instance could have enabled a trader harvest the maximum number of pips from the move.
Furthermore it is evident that price action signal off the EMA 20 while price is above a bullish cloud is an even better way to filter out high quality price action signals. The same applies to bearish signals below a bullish cloud.
We can therefore conclude that combining the Ichimoku cloud with the EMA 20 makes it easier to; filter out the quality of trade setups as well as offer realistic profit targets for trades taken when then two indicators are involved.
Ichimoku Technique Signs.
The Ichimoku Kinko Hyo technique offers the chance to obtain many different types of operating signals through the use of a single graph. As for all trading techniques, when we are using the Ichimoku Kinko Hyo for our operations, it is always advisable to take into account other elements (volumes, sentiment, seasonality, oscillators, etc …), but certainly the immediate graphic understanding of the trend and its evolution represent the strongest point of the Ichimoku technique.
As this technique aims to find the best point of entry within a trend, the answers we get from the signals will obviously be probabilistic and will have to conceive a margin of error. A wise money management will curb this phenomenon.
Here below, we will study in deep the 5 trading techniques that can be used by any trader. As we will see below, all the examples have been classified according to the emerged signal strength: strong, neutral and weak. The element that distinguishes the strength of the signal is where the signal is placed respect the Kumo, but in some cases there can be other indicators that can help the trader in the interpretation.
TENKAN SEN /KIJUN SEN CROSS.
This trading signal is applied when the Tenkan Sen (black line) cuts the Kijun Sen (red line)upward or downward.
The generated signal is bullish when the Tenkan Sen cuts the Kijun Sen from the bottom to the top. However, these signals, have a different degree of strength according to the position in which this signal occurs with respect to Kumo.
A weak bullish signal is recorded when the cutting of the two lines occurs below the Kumo.
A neutral bullish signal is recorded when the cutting of the two lines occurs inside the Kumo.
A strong bullish signal is recorded when the cutting of the two lines occurs above the Kumo.
The bearish signal is generated when the Tenkan Sen (black line) cuts the Kijun Sen (red line) from the top to the bottom.
A weak bearish signal is recorded when the cutting of the two lines occurs above the Kumo.
A neutral bearish signal is recorded when the cutting of the two lines occurs inside the Kumo.
A strong bearish signal is recorded when the cutting of the two lines occurs below the Kumo.
When the price crosses the Kijun Sen, then we get this sort of signal.
The generated signal is bullish when the price cuts the Kijun Sen (red line) from the bottom to the top.
A weak bullish signal is recorded when the Kijun is cut from the price below the Kumo.
A neutral bullish signal is recorded when the Kijun is cut from the price inside the Kumo.
A strong bullish signal is recorded when the Kijun is cut from the price above the Kumo.
The generated signal is bearish when the price cuts the Kijun Sen (red line) from the top to the bottom.
A weak bearish signal is recorded when the Kijun is cut from the price above the Kumo.
A neutral bearish signal is recorded when the Kijun is cut from the price within the Kumo.
A strong bearish signal is recorded when the Kijun is cut from the price below the Kumo.
The so-called Kumo Breakout signal occurs when the price cuts one of the two extremes of the Kumo.
A bullish signal occurs when the price enters the Kumo and breaks its upper wall upward.
A bearish signal occurs when the price enters the Kumo and breaks its lower wall downward.
SENKOU SPAN CROSS.
The Senkou Span Cross occurs when the Senkou Span A cuts the Senkou Span B.
Since the two Senkou lines are projected forward by 26 periods respect the current price, the element to be checked when the signal is realized is where the price is positioned compared to the Kumo.
The generated signal is bullish when the Senkou Span A (blue line) cuts the Senkou Span B (purple line) from the bottom to the top.
A weak bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned below the Kumo.
A neutral bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned inside the Kumo.
A strong bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned above the Kumo.
The generated signal is bearish when the Senkou Span A (blue line) cuts the Senkou Span B (purple line) from the top to the bottom.
A weak bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned above the Kumo.
A neutral bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned inside the Kumo.
A strong bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned below the Kumo.
CHIKOU SPAN CROSS.
When the Chikou Span rises above or falls below the corresponding price then this signal is generated.
An important element is also represented by the inclination of the Chikou Span at the time of the observation. In fact, the Chikou positioning above or below the corresponding price is not enough; it also must have an upward inclination for bullish signals and a downward one for those bearish.
Since the Chikou is nothing more than the current closing price moved back by 26 periods, the necessary elements are: for the long trade, a Chikou above the corresponding price and, for the short trade, a Chikou below the corresponding price. The positioning of the current price compared to the Kumo then contributes to make the signal more or less powerful.
The generated signal is called bullish when the Chikou Span (yellow line) cuts the price from the bottom to the top.
A weak bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned below the Kumo.
A neutral bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned inside the Kumo.
A strong bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned above the Kumo.
The generated signal is called bearish when the Chikou Span (yellow line) cuts the price from the top to the bottom.
A weak bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned above the Kumo.
A neutral bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned inside the Kumo.
A strong bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned below the Kumo.
Ichimoku’s Day Trading Strategy With The Primary Trend.
Position Trading based on technical set ups, Risk Management & Trader Psychology.
Article Summary: The concepts of Ichimoku can be applied across the board on all time frames. Short term traders can take the same rules and apply them to their time frame for holding a trade. However, there are two key aspects you should focus on with short term trading.
“If you’re going to panic, panic early.”
-Wall Street Proverb.
Trading short term has many real benefits if you’re comfortable with the seemingly erratic moves. Ichimoku provides a guiding light on trading in the direction of the trend but when you go down to a shorter time frame, a few key aspects of Ichimoku become exceedingly important. Here is a breakdown on what to focus on when trading on a shorter term time-frame, like a 5-minute chart or one of its kin.
Trading In the Moment.
Naturally, when trading with Ichimoku we advise that you always start with the cloud . The cloud has no mystic power that can predict what the market will do, but rather works to keep the odds in your favor by trading with a perception that the trend will most likely continue. Trend continuation is the most likely while never guaranteed outcome of the markets.
The Lagging Line & Base Line.
Beyond the cloud, the two key aspects of Ichimoku you can focus on are the lagging line and the base line. The lagging line is seen as our momentum indicator and when the lagging line breaks upward or downward, we have confirmation to join the day’s trend. The base line is the longer term moving average and a crossover of price in the direction of the overall trend is a strong confirmation of trend continuation.
The lagging line acting as a momentum indicator is often a novel thought. However, momentum is simply a tool to tell us if the current moves is likely, while not guaranteed, to continue. When the lagging line confirms the trade by breaking through the cloud or price as resistance, which is often a good time to enter a trade with appropriate risk management.
Learn Forex: Short Term USDJPY with Lagging Line Confirmation.
Chart Created by Tyler Yell, CMT.
When the lagging line breaks out, it will often do so by entering into “open space”. Simply put, open space means that in a downtrend, there is nothing supporting price and it will likely continue to fall until selling pressure lets off the gas. In an uptrend, the lagging line breaking to the upside shows no resistance and you can ride the trend until buying pressure is exhausted which can be seen by the lagging line moving to the other side of the cloud.
Learn Forex: Lagging Line Day Trade Higher Shows Exhaustion / Exit When Lagging Line Flips.
Chart Created by Tyler Yell, CMT.
Did You Miss The Initial Blast Off?
If you missed moment when the lagging line breaks out in the direction of the trend, hope is not lost. You can simply wait for price to come back to the base line and then push back in the direction of the trend. If you’re not sure how to identify a signal once price comes back to the signal line, you can look to a candlestick signal that is showing continuation.
Learn Forex: Wait for the Market to Show You the Trend Is Continuing With A Baseline Cross.
Chart Created by Tyler Yell, CMT.
Ichimoku Weekly Trade: Buy NZD JPY if Price Breaks Above the Base Line Showing Continuation.
Chart Created by Tyler Yell, CMT.
Ichimoku Trade: Buy NZDJPY If Price Breaks Through the Base Line at 79.35 To The Upside.
Stop: 78.35 ( Support with Bottom of Cloud)
Limit: 83.50 (Profit Target Based on Retracement toward Prior Low)
-Full Candle Bodies above the Kumo Cloud.
-The trigger line (black) is above the base line (light blue) or is crossing below.
-Lagging line is above p rice action from 26 periods ago.
-Kumo ahead of price is bullish and rising ( blue cloud = bullish Kumo)
Ichimoku is a dynamic tool that can be used on multiple time frames effectively. Regardless of the time frame, Ichimoku can help you see when a trend is likely to continue and help you recognize a good price to enter based on when price and the lagging line break through the clo u d or price crosses the base line . On the chart above, the NZD JPY trend is looking for some support and if the trend continues we can bene f i t from a great buy trade at a good price in relation to our risk levels.
Prior Ichimoku Articles:
--Written by Tyler Yell, Trading Instructor.
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There are many resources where you can find information on using and trading with traditional western methods. However, it seems there is not as much material written on some of the more popular eastern trading techniques. So in this lesson, we will take a closer look at the Ichimoku Cloud, a somewhat mysterious chart indicator, favored among many Japanese traders.
We will start our discussion with what the Ichimoiku cloud is, and then move into learning about how it is calculated and plotted, and finally I will present some practical strategies for trading with it.
What is Ichimoku Cloud ?
The indicator consists of three lines which have Moving Average functions and an area, called the “Cloud”. The Ichimoku cloud indicator is also sometimes referred to as Ichimoku Kinko Hyo or Kumo Cloud. Let’s now have look at a naked Forex chart:
As you see, this is a standard chart of the EUR/USD Forex pair. It is a stripped down chart; we can clearly see that the price action is moving along in a bearish trend. Now let’s add the Ichimoku Cloud on the chart and see what happens:
“Well, isn’t that a mess?” This is what most traders think when they first come across the Ichimoku Cloud indicator. There the three Moving Average lines – red, blue, and green. You also see the Cloud, which consists of the orange area on the chart. Although it looks quite chaotic to the untrained eye, to the Ichimoku trader, there is clarity within the chart.
Ichimoku Calculation.
So, as you can see from the Ichimoku chart above, there are three lines and the Cloud. Since the Cloud is formed by an upper and a lower level, we have a total of 5 lines on the chart. Each of these lines has Moving Average functions, and the lines do take into consideration past data from a certain number of periods on the chart, but there are also some distinct differences between the Ichimoku and the standard SMA, or EMA. The default parameters of the Ichimoku tool are 9, 26, 52. The following explanation regarding the structure of each line will move you closer towards understanding how the Ichimoku is constructed.
Chinoku Span.
The green line on the Ichimoku Indicator is called a Chinoku Span. If you have a look at the green plotted line on our chart above, you will notice that the green Chinoku Span mimics the price action of the currency pair. However, the line is displaced to the left by 26 periods. In this manner, the Chinoku Span line is a displaced lagging component within the Kumo Cloud structure.
Tenkan Sen.
The Tenkan Sen is the red line on the Ichimoku Indicator. This line has Moving Average functions as well. It takes into consideration the highest and the lowest points on the chart for a 9 period time frame. The Tenkan Sen displays a mid value of the two periods, which form the high/low on the chart among the last 9 periods.
The blue line of the Ichimoku Cloud is called Kijun Sen. This line has absolutely identical functions as the red Tenkan Sen. The only difference is that the Kijun Sen considers 26 periods instead of 9. The blue Kijun Sen creates a mid value between the highest and the lowest period on the chart, among the last 26 periods. Since the Kijun Sen takes more periods into consideration than the Tenkan Sen, it is slower and it reacts later to price moves.
The “Cloud” (Senkou Span)
As we said, the Cloud is the orange area on this Metatrader chart illustrated above. Notice that it is formed by an upper and a lower level, consisting of two lines.
The first line forming the Cloud averages the highs and the lows of the Kijun Sen and the Tenkan Sen. Also, the line is displaced 26 periods forward (to the right).
The other line of the Cloud shows a midpoint of the highs and the lows on the graph for a 52 period timeframe. As with the other line of the Cloud, this line is also displaced by 26 periods to the right.
These two lines constantly interact with each other. Furthermore, since there is an equal displacement, it tends to keep the two lines in close proximity of each other.
Trading with Ichimoku in Forex.
Now that we are familiar with the structure of the cloud chart, we will now go through some Ichimoku trading signals. The usage of a stop loss when trading with Ichimoku is recommended, so that you will be protected from any rapid price moves in the opposite direction. However, we won’t suggest a specific location for your stop loss placement when trading with the cloud. You can simply place it at a relative distance, based on current volatility, beyond the cloud so that the price won’t hit it during normal market fluctuations. For Ichimoku style trading, we will want to use the lines of the indicator to close our trades rather than using fixed targets or trailing stop loss orders. Let’s now discuss a few Ichimoku cloud trading systems.
Cloud – Kijun Sen Trading Strategy.
In this Ichimoku Clouds trading strategy we will enter the market when the price breaks out of the Cloud. We will enter in the direction of the breakout, attempting to catch a trend. When the price starts trending in our favor, we will continue to stay in the trade until the price action breaks the blue Kijun Sen in the opposite direction. Below you will see the way this trading strategy works:
This is the Daily chart of the GBP/USD for the Jul 2014 – Feb, 2015. The image shows a classic downtrend, which could be traded using this Ichimoku pattern setup.
The chart begins with the price action moving below the orange Cloud. This gives a sell signal on the chart and an Ichimoku trader would be looking to short the Cable. See that the price enters a bearish trend afterwards. The decrease is relatively sharp. On the way down the price action creates a few corrective moves, which nearly gets the GBP/USD price through the blue Kijun Sen. However, the price finds resistance at the blue line and continues its downward direction. The black arrows on the chart show the moments when the price tests the Kijun Sen as a resistance. Since the breakout attempts proved unsuccessful, the short trade should be held further.
Six months after the short signal on the chart, the GBP/USD price breaks and closes above the Kijun Sen line upwards. This creates an exit signal on the chart. As a result, the short trade should be closed on the candle that closes above the blue Ichimoku line.
Cloud – Chinoku Span – Tenkan Sen Trading Strategy.
In this Ichimoku Cloud trading method we will enter the market when the price breaks the Cloud. We will trade the Forex pair in the direction of the Cloud breakout trying to ride a trend. After the price starts trending in our direction we will hold the trade until the green Chinoku Span breaks the red Tenkan Sen. This is how it works:
We are now looking at the hourly chart of the EUR/USD Forex pair for Apr, 26 – May, 4, 2016. The Ichimoku indicator is also attached to our graph.
The chart image starts with the price breaking out of the Cloud in a bullish direction. The green circle shows the moment when the price closes a candle above the Cloud. This is the buy signal we need in order to go long the EUR/USD Forex pair. As you see, the price starts trending upwards shortly afterwards.
Now we need to follow the green Chinoku Span. See that it starts trending upwards after the price action. During the upwards price move the green Chinoku Span gains relative distance from the price action. This confirms the strength of the bullish trend.
One week after the buy signal on the chart and the continuous uptrend, the price creates a top and starts a sharp decline. This reflects the move of the green Chinoku Span. After the establishment of the top, the price decreases enough to bring the green Chinoku line through the red Tenkan Sen. According to our strategy this is the close signal and the long trade should be exited at this time.
Cloud Trading Strategy.
In the pure cloud technique, we will only use the Cloud for our Ichimoku Analysis. We will enter the market when the price breaks the Cloud. Our trade will be in the direction of the breakout. We will stay in the trade until the price move into the Cloud again and breaks it at the opposite level.
This price chart displays the 4-hour chart of the USD/JPY for March – April, 2016. The image shows that the price is in a down trend. We will implement the Ichimoku Cloud trading rules we just described for this example.
The image starts with the price switching above the Cloud and then quickly back below the Cloud. The downward breakout through the Cloud could be used to short the USD/JPY Forex pair. As you see, the price starts decreasing afterwards. The price drop is relatively sharp and the the USD/JPY starts losing steam after about 4.5% decline in its value. After the pair reaches a bottom, it starts consolidating, and then starts moving upwards, back into the Cloud. After a short hesitation in and out of the Cloud from the lower side, the price action breaks the Cloud in a bullish direction. This creates a very strong new long signal and a short exit signal on the chart as well. The short trade should be closed out when the price action closes a candle above the Cloud.
You will notice that the Cloud is the most lagging component of the Ichimoku trading tool. As a result, this strategy is very successful when the Forex pair is trending, but on the other hand, it can give you many false signals when the pair is consolidating. During ranges you will often see the price hopping above and below the Cloud creating a whipsawing effect with many false signals.
Take note that in these three trading strategies we only used the Ichimoku Cloud indicator and nothing else. Many traders, especially those based in Japan and other Eastern counties rely heavily or exclusively on this trading indicator for their trade analysis.
Also, you may have noticed that we used the Cloud component in each of our three trading strategies. This is so because the Cloud is the most important part of the Ichimoku indicator. The Cloud is typically used to open trades when trading with Ichimoku.
Customizing the Ichimoku Cloud Indicator.
The Kumo Cloud tool is fully customizable. You can always remove and add components of the cloud indicator in order to best suit your trading style. If you are trading using the Cloud strategy, your Ichimoku indicator could be setup to look the following way:
In this chart image you see that we only have the Cloud as part of the Ichimoku indicator. We have removed the Kijun Sen, the Tenkan Sen, and the Chinoku Span. If you prefer trading using just the cloud, then this chart template would provide a better visual to guide your trading. The same applies for the other two strategies we discussed earlier.
If you trade using the Cloud and the blue Kijun Sen, your chart could be setup to look the following way:
Note we have also added the blue Kijun Sen to the cloud in order to adapt the Ichimoku Cloud chart to our trading strategy. And so, the red Tenkan Sen and the green Chinoku Span are not plotted in this example.
Let’s now display a third option for chart customization using the Ichimoku indicator:
This time the Kijun Sen is gone. At the same time, we have added the red Tenkan Sen and the Chinoku Span. This way we will have a clearer picture if we want to implement this trading strategy.
As you see, the Ichimoku Cloud trading indicator can fully adapt to your needs. You can always add and remove components of the indicator. Also, if you are back testing an automated Ichimoku based trading system, you can always change the periods of the separate Ichimoku components to help with your optimization efforts. But make sure, that if you are performing optimization tests, that you forward test as well as back test the data set to avoid curve fitting.
Wrapping up, the Ichimoku indicator is one of the most underutilized but certainly useful trading tools available to the retail spot forex trader. When used properly, it provides a rich set of information, and strategy options, and it is fully customizable, to fit your trading style.
Conclusion.
The Ichimoku Cloud indicator is also referred to as Ichimoku Kinko Hyo or Kumo Cloud. The interaction between the different Ichimoku components creates different trading signals. The Kumo Cloud is a very good standalone tool. No additional tools are required when you are an Ichimoku trader. The Ichimoku indicator consists of three lines and a Cloud formed by other two lines. Kijun Sen – creates a mid value between the highest and the lowest period on the chart, among the last 26 periods. Tenkan Sen – displays a mid value of the two periods, which form the high/low on the chart among the last 9 periods. Chinoku Span – exact copy of the price action, but it is displaced backwards by 26 periods. The Cloud – The first line forming the Cloud averages the highs and the lows of the Kijun Sen and the Tenkan Sen. Also, the line is displaced by 26 periods forwards (to the right). The other line of the Cloud shows a midpoint of the highs and the lows on the graph in a 52 period timeframe. It is also displaced forward 26 periods. Three Ichimoku trading strategies include the following: Enter when the price breaks the Cloud in the direction of the breakout. Stay in the trade until the price breaks the blue Kijun Sen in the opposite direction. Enter when the price breaks the Cloud in the direction of the breakout. Stay in the trade until the green Chinoku Span breaks the green Tenkan Sen in the opposite direction. Enter when the price breaks the Cloud in the direction of the breakout. Stay in the market until the price breaks the Cloud in the opposite direction. It is recommended to use a volatility based stop loss order in each of these strategies. Ichimoku strategies tend to work best when the Forex pair is trending, rather than during consolidative phases. The Ichimoku Cloud indicator is fully customizable. You can always remove some of its components, or adjust the periods, to suit your personal trading style.
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