Advanced Ichimoku: the secret to maximizing profits

Traders in the Forex market are certainly familiar with the term “confluence”, an advanced Ichimoku technique. This term refers to combining one tool with another to create a more powerful trading method. Today’s Crypto Trading article will go into detail on how to combine the Ichimoku indicator with other technical indicators. Let’s follow the sections of the article!

What is Ichimoku?

First, let’s learn together the definition, and structure of What is ichimoku and what are its disadvantages.

Advanced Ichimoku Indicator Definition

Ichimoku Cloud, a technical tool, not only helps analyze support, resistance, and trend levels but also measures momentum and provides trading signals. Developed in the late 1930s by Goichi Hosoda, a Japanese journalist, and published in 1969.

Ichimoku quickly gained attention in the Asian and Japanese financial markets. By 1990, it had spread to Western countries and is now widely used. Ichimoku is not only used for stock analysis but also applied to all financial instruments and trading time frames, helping investors understand the market and find potential trading opportunities.

Structure of Ichimoku indicator

The indicators in Ichimoku are based on moving averages with some adjustments. The names of the lines include traditional Japanese names and commonly translated names.

Ichimoku consists of 5 support and resistance lines, with intersections as additional signals:

• Tenkan-Sen (Conversion Line): (9-session high + 9-session low)/2
• Kijun-Sen (Baseline): (26-session high + 26-session low)/2
• Chikou Span (Lagging Line): Current closing price drawn 26 sessions back
• Senkou Span A (Leading Line A): (Conversion Line + Base Line)/2, drawn 26 periods ahead
• Senkou Span B (Leading Line B): (52-session high + 52-session low)/2, drawn 26 sessions ahead

Disadvantages of Ichimoku indicator

The Ichimoku indicator also has some disadvantages that should be noted before using it:

1. Lagging Signals: Ichimoku is calculated based on historical price data. Therefore, it may produce signals that are lagging behind current market price movements. This may cause investors to miss potential trading opportunities or make late trades, resulting in losses.

2. Complexity: Compared to other technical indicators, Ichimoku has a more complex structure. It includes many different components such as Senkou Span, Kumo Cloud, Chikou Span, and price lines. Understanding how Ichimoku works and interpreting its signals can be difficult for some investors, especially beginners.

3. Confusing signals: Ichimoku can generate multiple buy/sell signals at the same time, leading to noise and difficulty in determining the most accurate signal. Lack of experience and skills in interpreting Ichimoku signals can lead investors to make wrong trading decisions.

4. Ineffective in volatile markets: Ichimoku may be ineffective in markets with sudden and strong price movements. Since it is calculated based on historical data, Ichimoku may not be able to adapt to sudden changes in the market in time, resulting in giving false signals.

See more: Ichimoku: Optimal trend indicator system for traders

Benefits of using advanced Ichimoku

Although Ichimoku has the disadvantages mentioned above, Ichimoku has significant outstanding benefits:

Ichimoku helps identify market trends

Based on the components of the Ichimoku cloud, investors can determine the market trend. If the price is above the Kijun-Sen or Tenkan-Sen line, or below the Chikou Span line, the market is in an uptrend. Conversely, when the price is below the Kijun-Sen or Tenkan-Sen line, or above the Chikou Span line, the market is in a downtrend. The thickness, color of the Kumo cloud, and the distance from the price line to the Kumo cloud also help predict the next price action.

Determine buy/sell points

The highlight of advanced Ichimoku is its ability to provide accurate trading signals for investors to determine potential buy/sell points. This system combines many important factors such as:

• Price Trend: Advanced Ichimoku helps identify uptrends, downtrends, or sideways trends effectively. From there, investors can make buy/sell decisions in accordance with market trends.
• Market Momentum: This system measures market momentum through Kumo Clouds, Senkou Span, and Chikou Span. This helps investors assess the strength of the trend and predict the likelihood of the trend continuing.

Identify support and resistance zones

The benefit of using Ichimoku is its ability to identify areas of support and resistance. The Kijun-Sen baseline, Tenkan-Sen signal line, Chikou-Span, and Kumo cloud can all help identify these important levels. The Kijun-Sen line is often considered a strong support or resistance level. While the Tenkan-Sen line provides signals about the short-term trend. The Chikou-Span, which reflects current prices compared to past prices, helps determine trend continuation or reversal. The Kumo cloud, with its thickness and color, shows the strength of the trend and important support and resistance levels, thereby helping investors predict future price action.

Advanced Ichimoku helps measure momentum

Advanced Ichimoku helps measure momentum, which helps distinguish between strong and weak markets. This greatly aids in risk management. Ichimoku provides a comprehensive view of market momentum through lines such as Tenkan-Sen, Kijun-Sen, and Chikou-Span. When the price is above these lines and the Kumo cloud is dense, it indicates a strong market. Conversely, if the price is below these lines and the Kumo cloud is thin, it indicates a weak market. This allows investors to make more informed decisions and manage risks more effectively.

A significant benefit is related to the components of Ichimoku. These lines will significantly support the efficiency of crypto trading bots. Bots can automatically analyze market data and execute trades based on signals generated from the components of Ichimoku. This helps increase automation and efficiency in crypto trading.

Ichimoku Trading Methods and Strategies to Improve Efficiency

Here are some Ichimoku trading strategies combined with other technical indicators:

Ichimoku Tenkan-Sen/Kijun-Sen Indicator Strategy

When the Tenkan-Sen and Kijun-Sen lines intersect, investors can recognize the market trend and make reasonable buy/sell decisions.

• Buy Signal: When Tenkan-Sen crosses Kijun-Sen from bottom to top and the crossover is below the Kumo cloud.
• Sell ​​Signal: When Tenkan-Sen and Kijun-Sen cross each other from top to bottom, and the intersection point is above the Kumo cloud.

To trade when Tenkan-Sen and Kijun-Sen cross:

1. Execute trades based on candle signals. Use green candles for Buy orders and red candles for Sell orders.
2. Place stop loss below the signal zone for Buy orders and above the signal zone for Sell orders.
3. Determine the take profit point based on the investor’s expected risk and reward ratio.

Advanced Ichimoku Strategy Senkou Span

This method involves the intersection of Senkou Span A and Senkou Span B. These are two important lines that form the Kumo cloud. Buy/sell signals are determined based on the intersection of these two lines.

• Buy Signal: When Senkou Span A crosses Senkou Span B from the bottom up, the Kumo cloud turns from red to green.
• Sell ​​Signal: When Senkou Span A crosses Senkou Span B from top to bottom, the Kumo cloud turns from green to red.

When Senkou Span B and Senkou Span A intersect:

1. Entry point: At the green candle near the crossover zone (buy) and at the bearish signal candle near the crossover zone (sell).
2. Stop loss: Below the nearest support line crossover (buy) and above the nearest resistance line crossover (sell).
3. Take Profit Point: Follow the expected risk and reward ratio of the trade.

Ichimoku Chikou Span Crossover Price Indicator Strategy

This is also a potential sign to open an order.

• Buy Signal: When the Chikou-Span line crosses the price line from bottom to top. Then the Chikou line moves away from the price line.
• Sell ​​Signal: When the Chikou-Span line crosses the price line from top to bottom. Then the Chikou line moves away from the price line.

In this case, traders would execute the order as follows:

1. Entry point: Determined by the signal candle near the intersection of the Chikou-Span line and the price line. The green candle gives a Buy signal and the red candle gives a Sell signal.
2. Stop loss: Below the crossover, closest to support (Buy), and above the crossover, closest to resistance (Sell).
3. Take Profit Point: Follow the expected risk and reward ratio of the trade.

See more: Open an Bybit account – explore the crypto exchange

Ichimoku Kumo Breakout Strategy

Breakout strategy is high risk but can bring high profit. Investors should only apply it when they have enough experience.

• Buy Signal: Downtrend but weakening. Price breaks Kumo cloud from the bottom up and closes above the cloud.
• Sell ​​Signal: Uptrend but weakening. Price breaks Kumo cloud from top to bottom and closes below the cloud.

How to enter an order:

1. Entry point: Immediately after breakout.
2. Stop loss: Below the AB crossover for Buy and above the crossover for Sell.
3. Take profit: According to the expected risk and reward ratio.

Advanced Ichimoku Trading Guide

Each part of Ichimoku can be used as a standalone indicator:

• Entry: Follow green candles at the confluence of multiple signals.
• Take Profit: At key Fibonacci levels, with trader’s R ratio.
• Stop Loss: Below the nearest and important support, 10-15 pips away from the crossover zone.

Buy/Sell trading is similar when using Ichimoku multi-signals:

• Tekan-Sen crosses Kijun-Sen from top to bottom, the intersection point is above the Kumo cloud.
• When Senkou-Span A cuts through Senkou-Span B from above, the Kumo cloud changes color.
• The Chikou-Span line is below the price line.

Execute a sell trade in the direction of the trend: 

• Entry: Following the red candle below the Kumo cloud.
• Stop loss: Above the nearest resistance, near the crossover area, with a 2% Stop loss.
• Take Profit: At each person’s Fibonacci extension levels and R ratio.

Conclude

Crypto Trading has presented advanced Ichimoku methods through the sections of the article. This tool and technical analysis methods all require sensitivity and understanding. To improve, it is not only necessary to understand but also to practice regularly and closely monitor. We have many more articles and useful shares to help investors become more successful. Follow now!

FAQs

What is advanced Ichimoku?

Advanced Ichimoku is a technical analysis method that focuses on measuring trends, support, resistance, and trading signals using the Ichimoku cloud pattern.

What is the advanced way to use Ichimoku in trading?

Advanced Ichimoku identifies trends, entry points, stop-loss points, and take-profit points from components such as Senkou Span, Tenkan-Sen, Kijun-Sen, and Chikou Span.

Is Advanced Ichimoku Suitable for Beginner Traders?

Advanced Ichimoku requires basic knowledge of technical analysis and beginners need time to master and understand deeply before applying it to real trading.