There are numerous trading indicators and patterns that traders use to profit from their trades. However, sometimes it can be overwhelming to know which indicators to use for building a trading strategy. Feeling intrigued? Don’t worry we have got you. In today’s blog, we will look at one such trading strategy called Ichimoku and how it is used.
What is the Ichimoku Strategy?
This trading strategy goes way back to the late 1930s and was developed by a Japanese journalist named Goichi Hosoda. This technical analysis system is used to identify trend direction, support and resistance, and momentum of prices.
It is most widely used by traders, and though looks complex but equips traders with pertinent information. This indicator is believed to work very well in Japanese markets like helping Yen currency traders and the Japanese market index Nikkei and hence remains very popular in Japan.
This is also reflected in its name, ‘Ichimoku’. If you were to translate it into English it appears to be a ‘One Glance Equilibrium Chart’.
How Does Ichimoku Strategy Work?
On the face of it, it might sound complicated but breaking it into different parts will make it much easier.
This strategy has five primary components and a sixth one that is derived from those five. These are the building blocks of this strategy and understanding this will help an individual to learn this strategy as a whole.
The components are as below:
- Tenkan-Sen – It is the average of high and low over the previous 9 periods
- Kijun-Sen – It is the average of high and low over the previous 26 periods
- Senkou Span – It is simple the average of the above two lines: Tenkan Sen and Kijun Sen
- Senkou Span B – It is the average of the sum of 52 period high and low
- Chikou Span – It reflects the closing price of the previous 26 periods
- Kumo cloud – The difference between Senkou span and Senkoi span B
Traders can use this strategy to identify support and resistance, trend confirmation, etc. with the help of the above components.
The Kijun sen and Tenkan sen lines are used to find out the resistance and support levels.
When the Tenkan Sen lines cross above the Kijun sen, it is known to be a bullish trend and vice-versa. The Senkou lines are used to identify the direction of the trend. The Senkou span line passing above the Senkou span B line indicates a bullish trend.
Similarly, the Chikou span helps in identifying the strength of momentum and if this line is above the current price it indicates positive bullish momentum and vice-versa.
You can also enroll in a course to learn this trading strategy. While there is ‘N’ number of ichimoku cloud courses available, quality is of the essence. Upsurge.club clears the clutter and dwells right through the basics and helps you learn from the most esteemed trading fraternity. It also has some of the best technical analysis courses that will help you to complement your other trading strategies.
Conclusion
While this article has provided you with a comprehensive idea of this strategy, it’s best to learn about the concepts first and then try to implement them in a real set-up. Ichimoku cloud course from Upsurge.club helps you to gain this understanding and excel in it.
