Ichimoku Cloud Indicator Strategy : This strategy will involve the calculation of the average and then comparing with the current market price. The indicator is complex as it involves multiple averages. The Ichimoku indicator is a trading tool but some traders feel overwhelmed by looking at the lines. The Ichimoku indicator has two different components as conversion and baseline. They look like moving average on your chart but invisible. The cloud is a popular aspect of the indicator because it stands out. The strategy is made up of a lower and upper boundary.
The space between the two lines is shaded in green or red. It is the first and fast-moving boundary of the cloud between the conversion and the baselines. The second is the moving boundary middle between the 52 periods high and low. The space within the cloud is a noise zone here trading is avoided. They provide momentum signals. It is a collection of some technical indicators that support the resistance level. Ichimoku cloud was developed by Goichi Hosoda a Japanese journalist and published in year 1960s. They will provide data points than a standard candlestick chart.
The high and low are called the highest and lowest price during the period. Here we calculate the conversion and baseline. If the leading span A is based on prior calculation then after calculation data points are plotted at 26 periods. Then we calculate leading span B and plot data point at 26 periods. For the lagging span, we plot the closing price of 26 periods in the past. Here the difference between Span A and Span B is colored to create the cloud. While trading A goes above leading span B color of cloud green. Leading span A is below leading span B then the color of cloud red. Follow the steps and we create one data point. Then create a line as each period come to end and goes through the steps to create new data points for a period. We connect the data point to each other to create lines and cloud appearance.
view moreThe actual cloud aspect of the indicator appears on a chart as it looks like two lines filled with a color. Senkou span A is above senkou span B on the chart that will indicate an upward trend in green color. Then comes B above the Senkou span indicating in the downward trend and cloud will appear red in color. The price line will appear above the cloud when the trend up and goes below the line of the trend down. So if the price line sits within the cloud it is assumed that trend is flat or horizontal.
begin{aligned}&text{Conversion Line(kenkan sen)}=frac{text{9-PH}+text{9-PL}}{2}&text{Base Line(kijun sen)}= frac{text{26-PH + 26-PL}}{2} &text{Leading Span A (senkou span A)}= frac{text{CL + Base Line}}{2} &text{Leading Span B (senkou span B)}= frac{text{52-PH + 52-PL}}{2} &text{Lagging Span (chikou span)} = text{Close plotted 26 periods} &phantom{text{Lagging Span (chikou span)} =} text{in the past} &textbf{where:} &text{PH} = text{Period high} &text{PL} = text{Period low} &text{CL} = text{Conversion line} end{aligned}Conversion Line (kenkan sen)=29-PH+9-PLBase Line (kijun sen)=226-PH + 26-PLLeading Span A (senkou span A)=2CL + Base LineLeading Span B (senkou span B)=252-PH + 52-PLLeading Span (chikou span) =close plotted 26 peroids lagging Span (chikou span) =in the pastwhere:PH=Period highPL=Period lowCL=Conversion line
The strategy is used when we include set from other charts and indicators that shows projection of future support .Then the resistance levels should be used in conjunction with variety of technical analysis tools.
The Ichimoku framework is a solid, all-in-one indicator that provides a lot of information at the same time. There is no secret at the time of using and interpreting indicators. The individual components are correlated with trading based on moving averages. They have their own place and the trader decides to follow a trading strategy to create the best robust framework.
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