ICHIMOKU CLOUD TRADING

The most unique feature about Ichimoku Kinko Hyo is its cloud or “kumo” in its charting.

The Cloud or Kumo

The chart below shows the price candle and cloud only ichimoku charting without the other 3 lines (Tenkan-sen, Kijun-sen & Chikou Span).

In its most simple form, the cloud provides an indicative support and resistance levels which can be labeled as cloud hi and cloud lo.

When price action is below the cloud, cloud lo becomes the first level of resistance, cloud hi become the second level of resistance.

Similarly, when price action is above the cloud, cloud hi becomes the first level of support; cloud lo becomes the second level of support.

From the Chart itself, it is within one glance a trader can identify the trend of the current price action and the support levels of the price action from the cloud hi and cloud lo.

Two Simple Ichimoku Trading Strategies

Understanding this concept about the cloud in the ichmoku charting, two simple trading strategies can be developed.

When price action moves from above the cloud to below cloud lo, it gives a sell signal. Stop loss can be placed at or above cloud hi.

When price action moves from below the cloud to above cloud hi, it gives a buy signal. Stop loss can be placed at or below the cloud lo.

These two ichimoku trading strategies can be enhanced further by each individual trader’s preference.

For the purpose of this literature, the Buy and Sell signals have been enhanced; buy end of day only when a full period is above the cloud, sell end of day only when a full period is below the cloud.

The ichimoku cloud trading is to let the position stay with the trend for as long as it could once it is established.