Ichimoku
6 min reading
Do you want to profit from cryptocurrency trading? The technical analysis tool the Ichimoku Cloud will help you to do it.
Nuage Ichimoku
We know another indicator that helps to understand the trading market and make profits as the Ichimoku Cloud. In this article, we will talk about the Ichimoku cloud used by traders in stock markets, Forex, and cryptocurrency markets. We will also explain how you can use this indicator to trade on the bit4you.
What is Ichimoku Cloud all about?
The Ichimoku Cloud is a technical analysis method comprising several metrics. It is a trend following system with an indicator similar to moving averages. It is also one of the trading indicators that predict price movement. Besides these, it offers a unique perspective on support and resistance. Most traders consider Ichimoku to be very difficult to understand, but once they are familiar with it, they find it interesting to use. Like any other indicator, they must use it with others to confirm trends and reduce risk. The amount of information it displays can be overwhelming for most novice traders, as it is a more complicated indicator. In this regard, it is recommended to master the simpler tools first before using the Ichimoku Cloud.
History of Ichimoku
The idea for this Cloud belongs to Goichi Hosoda. This financial analyst has been writing articles for a long time, which were published under the pseudonym Sanjina Ichimoku. Subsequently, Goichi devoted himself entirely to the development of the presented indicator and improved it for many years.
Formula of Ichimoku cloud
Ichimoku is an indicator represented by a combination of five lines, three of which are moving averages, and two are their derivatives:
Kijun-sen is the main line that shows the presence and support of long-term trends. Kijun is usually marked with a red line; Tenkan-sen is an inverted line which indicates the presence and direction of a short-term trend. It is a purple line; Chinkou Span – a line chart based on closing prices, then shifted by several periods. It allows you to compare the current closing price. It is usually shown in brown; and Senkou Span A is the leading line, which is the primary border of the so-called “Cloud” or Kumo. Sengoku Span A is usually shown in blue. The second line is formed by Senkou Span B, drawn as a green line. Five different formulas represent these five lines.
Conversion line (tenkan sen) = 9-PH +9-PL/2
Base Line (Kijun Sen) = 26-PH+26-PL/2
Leading Span A (Senkou Span A) = CL+Base Line/2
Leading Span B (Senkou Span B) = 52-PH+52-PL/2
Lagging Span A (Chikou Span) = Close plotted 26 periods in the past
Where:
PH= Period High
PL = Period Low
CL = Conversion Line
How to use Ichimoku on bit4you
Bi4you is a crypto exchange platform that allows its users to trade cryptocurrency at very convenient rates. As a trader on bit4you with a valid account , trading using the Ichimoku cloud may not be very complicated. Note that with the Ichimoku cloud, movements on the chart indicate different price actions. If the market price is above the conversion line, it suggests a short-term upward momentum, and if it is below the conversion line, it shows a short-term downward momentum. The baseline is the medium-term price movement, otherwise known as confirmation. If the market price is above the baseline, it suggests a medium-term upward momentum and if the reverse is the case, it suggests a medium-term downward momentum. An increasing baseline indicates an upward trend, while a decreasing baseline indicates a downward trend. In addition, the lagging span indicates the picture of the trend. When the lagging span is above the current price, it shows that current prices are higher than the previous prices and vice versa. When lagging span is near the current price, it shows a trading range. The kumo cloud that is plotted on the chart shows dynamic support and resistance based on price action.
In conclusion, when it concerns Ichimoku cloud, what you need to note is that you use cloud to identify the long-term trend direction. It is good to maintain trade in the direction of the cloud. More so, the Cloud acts as support and resistance during trends. However, when price enters the Cloud, it signals a shift in momentum. Therefore, a trader can either use the Conversion/ Base lines anytime they want to exit or exit when price breaches the Cloud. Mind you that during ranges, the Ichimoku indicator loses its validity.
Conclusions
- The Ichimoku Cloud is used to anticipate and identify entry and exit points and future trends.
- It is represented by a combination of five rows, three of these lines are mobile averages, and two are their derivatives.
- It should be used together with others to confirm trends and reduce risks. Primarily, this tool seems very complex. Despite the complexity of signal analysis, any trader can figure out how to work with the indicator.
6 min reading
Technical analysis tools help traders to make a profit in the market. The basis of modern technical analysis is the Dow theory.