The Ichimoku Kinko Hyo indicator, often simply referred to as Ichimoku, is a powerful technical tool used in Forex trading. Developed by Japanese writer Goichi Hosoda, this indicator provides valuable insights into market trends, support and resistance levels, momentum, and trading signals.
How To Understand?
A bullish signal occurs when Senkou Span A is above Senkou Span B, creating a green cloud. A bearish signal occurs when Senkou Span B is above Senkou Span A, forming a red cloud.
The Senkou Span Twist
Senkou Span Twist is like a subtle dance within the Ichimoku cloud. Picture this: the cloud boundaries (Senkou Span A and Senkou Span B) sway gracefully, occasionally intertwining. When they cross paths, it’s akin to a tango—a potential signal of trend reversal.
How to Trade with Ichimoku Forex Indicator
Buy Entry
Bullish Cloud Confirmation
- Look for a pale green cloud on the Ichimoku chart. This indicates a bullish long-term trend.
- Consider entering a buy position when the cloud color aligns with the overall trend direction.
Tenkan Sen and Kijun Sen Crossovers
- Monitor the Tenkan Sen (red line) and Kijun Sen (blue line).
- Buy when the Tenkan Sen crosses above the Kijun Sen. This crossover signals potential upward momentum.
Chikou Span Confirmation
- Confirm the trend using the Chikou Span (lagging line).
- If the Chikou Span aligns with the price action, it supports the bullish bias.
Take Profit
- Set your take profit level based on previous resistance levels or other technical analysis.
- Consider using the Senkou Span B (forward span B) as a potential target.
Stop Loss
- Place your stop loss below the recent swing low or the cloud support.
Sell Entry
Bearish Cloud Confirmation
- Look for a thistle-colored cloud on the Ichimoku chart. This indicates a bearish long-term trend.
- Consider entering a sell position when the cloud color aligns with the overall trend direction.
Tenkan Sen and Kijun Sen Crossovers
- Monitor the Tenkan Sen (red line) and Kijun Sen (blue line).
- Sell when the Tenkan Sen crosses below the Kijun Sen. This crossover signals potential downward momentum.
Chikou Span Confirmation
- Confirm the trend using the Chikou Span (lagging line).
- If the Chikou Span aligns with the price action, it supports the bearish bias.
Take Profit
- Set your take profit level based on previous support levels or other technical analysis.
- Consider using the Senkou Span A (leading Senkou A) as a potential target.
Stop Loss
- Place your stop loss above the recent swing high or the cloud resistance.
- Adjust the stop loss based on your risk tolerance and market conditions.
Ichimoku Forex Indicator Settings
Conclusion
Ichimoku indicator, with its cloud-based approach, offers a holistic view of market dynamics. While it has drawbacks, mastering its intricacies can enhance your trading strategy. Remember to combine it with other tools for well-timed decisions.
Recommended MT5 Brokers
XM Broker
- Free $50 To Start Trading Instantly! (Withdraw-able Profit)
- Deposit Bonus up to $5,000
- Unlimited Loyalty Program
- Award Winning Forex Broker
- Additional Exclusive Bonuses Throughout The Year
>> Sign Up for XM Broker Account here <<
FBS Broker
- Trade 100 Bonus: Free $100 to kickstart your trading journey!
- 100% Deposit Bonus: Double your deposit up to $10,000 and trade with enhanced capital.
- Leverage up to 1:3000: Maximizing potential profits with one of the highest leverage options available.
- ‘Best Customer Service Broker Asia’ Award: Recognized excellence in customer support and service.
- Seasonal Promotions: Enjoy a variety of exclusive bonuses and promotional offers all year round.
>> Sign Up for FBS Broker Account here <<
(Free MT5 Indicators Download)
Click here below to download: