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Proven Strategies That Keep You Ahead of the Market
Ichimoku Clouds
Dominate the trend, strengthen your trading
Create a dominating effect on your charts to show trend direction, momentum and direct trading signals with the Ichimoku Cloud Library of templates, studies and indicators.
n 1969, Goichi Hosada, a journalist in Tokyo, developed a very versatile indicator that has withstood the test of time. The Ichimoku Cloud, is also known as Ichimoku Kinko Hyo, which translates into "One glance equilibrium chart." The indicator defines support and resistance, identifies trend direction, gauges momentum, and provides trading signals. It can also be used with western indicators to help confirm their signals. The Ichimoku Cloud is straightforward, the concepts are easy to understand, and its signals are clearly defined.
Overall market trends can be identified at-a-glance, based on where the Ichimoku cloud is in relation to the current market price. When the market is above the cloud the overall trend is bullish, and when the market is trading below a cloud formation the market is bearish.
Ichimoku Clouds are extremely versatile in function for futures, forex and stock traders.
- Direct entries and exits more efficiently
- Define support and resistance
- Identify trend direction
- Gauge momentum
- Clouds are applicable in trend and range bound markets
- Easy visualization of developing trends in fast moving markets
- Identification of potential buy and sell signals
The Cloud or “Kumo” is the most dominating feature of this type of chart.
The Senkou Span A (green), which is the average of the Kijun and Tenkan lines, and the Senkou Span B (red), based off the 52 day high to low range, form the Cloud.
This chart shows the S&P 500 Index (Trade Navigator Symbol: $SPX) on a daily bar period. The market has broken above the cloud and Span A is rising above Span B, creating a bullish trend in the market.
This chart it shows the Dow Jones Industrial Average (Trade Navigator Symbol: $DJIA) on a daily bar period. The market has broken below the cloud and Span A is falling below Span B creating a bearish trend in the market.
The Tenkan (blue) and Kijun (red) lines are based off of the high to low range of the last 9 and 26 days. Much like the MACD, these lines are useful for showing momentum in the market. The theories behind these lines are used much like a crossover in the MACD.
The forex pairing of the U.S. Dollar compared to the Japanese Yen (Trade Navigator symbol: $USD‐JPY) is displayed based on daily bars. The first crossover of the Tenkan line below the Kijun line occurs at the top of the cloud. Once the market closes outside of the cloud a downtrend is confirmed.
This chart shows Verizon Communications Inc. (Trade Navigator Symbol: VZ) on a daily bar. The overall trend in the market is up with the market being above the green Cloud. The market then pulls back to the Cloud and closes below the Kijun line showing the market has reached a short term oversold area.
Chicago Wheat (Trade Navigator Symbol: W2‐067) is displayed in this chart, based on a daily bar. The overall trend in the market is down when the market reaches a tipping point. The market then crosses over the Kijun line, signifying an overbought area. The prices try to reach the Cloud but never make it and then cross below the Kijun line in mid‐March. Soon after, the Tenkan line crosses below the Kijun line to confirm the bearish move.
