What is Ichimoku? This is not only a simple technical analysis tool but also a complex system that provides a comprehensive view of market trends and trading signals. Let’s learn more about what is Ichimoku with Crypto Trading through the article below.
What is the Ichimoku concept?
Ichimoku is a popular technical analysis tool in financial trading. Let’s learn more about the Ichimoku indicator!
What is Ichimoku?
What is Ichimoku? Its full name is Ichimoku Kinko Hyo, often referred to by traders as Ichimoku Clouds or Ichimoku Cloud. This is a set of technical indicators that help traders see all the signals on the candlestick chart. It can work independently without having to combine with any other indicators.
It helps traders identify important information for trading such as:
- Determine price trends
- The momentum of the trend
- Support and resistance zones
- Generate buy and sell signals to open and close orders
The Ichimoku Cloud was developed by Japanese journalist Goichi Hosoda and published in the late 1960s. Provides more data than a standard candlestick chart. Although it may seem complicated at first, for those familiar with charts. Trading signals from Ichimoku are usually easy to understand and clear.
Components of Ichimoku
What are the components of Ichimoku? Ichimoku consists of five main lines:
Tenkan-sen (Conversion Line): Calculated by taking the average of the highest and lowest levels over 9 periods. This is a short-term line that helps determine short-term trends.
Kijun-sen (Base Line): Calculated by taking the average of the highest and lowest levels over 26 periods. This line is often used to determine the medium-term trend and give trading signals.
Senkou Span A (Leading Span A): Calculated by taking the average of Tenkan-sen and Kijun-sen. Then pushing forward 26 periods. This line together with Senkou Span B forms the Kumo (cloud). Helps identify future support and resistance zones.
Senkou Span B (Leading Span B): Calculated by taking the average of the highest and lowest highs over 52 periods, then moving forward 26 periods. This is a long-term line, providing information about long-term support and resistance areas.
Chikou Span (Lagging Line): Current closing price retraced 26 periods. This line helps determine the strength of the current trend.
Kumo (Cloud) : Formed by Senkou Span A and Senkou Span B. This cloud helps determine the main trend of the market.
See more: Ichimoku: Optimal trend indicator system for traders
Using Ichimoku indicator
Below is information for Advanced Ichimoku
Market analysis through Ichimoku
Identify market trends :
- Uptrend: When the price is above the Kumo (cloud), the market is in an uptrend. The further away from the cloud, the stronger the trend.
- Downtrend: When the price is below the Kumo, the market is in a downtrend. The further away from the cloud, the stronger the trend.
- Unclear Trend: When the price is inside the Kumo, the market has no clear trend and may move sideways.
- Tenkan-sen and Kijun-sen: When Tenkan-sen (conversion line) crosses above Kijun-sen (baseline), it is a buy signal. When Tenkan-sen crosses below Kijun-sen, it is a sell signal.
- The gap between Tenkan-sen and Kijun-sen: A large gap between these two lines indicates the strong momentum of the current trend.
How to Trade When Tenkan-Sen Crosses Kijun-Sen
Trade when Chikou Span crosses the price line with what is Ichimoku?
Use when combining elements of the Ichimoku cloud at the same time
If Ichimoku is currently in the following state, investors can place a buy order:
- The closing price is above the cloud.
- Tenkan-Sen and Kijun-Sen cross each other on the Ichimoku cloud.
- Senkou Span A is placed above Senkou Span B.
- Chikou Span is placed above the price line.
If it is currently in the following state, investors can place a sell order:
- The closing price is below the cloud.
- The intersection of Tenkan-Sen and Kijun-Sen is below the Ichimoku cloud.
- Chikou Span is placed below the price line.
What does the Ichimoku indicator mean?
It is a popular technical analysis tool in financial trading. It is used to assess market trends and generate trading signals. So what is the main meaning of the Ichimoku indicator? Including:
- Identify market trends: Helps traders identify the main trend of the market, whether it is up, down, or sideways.
- Identify support and resistance levels: This indicator provides information about important price zones.
- Providing trading signals: Generates buy and sell signals based on the interaction between its components such as Tenkan-Sen, Kijun-Sen, Senkou Span A and B, Chikou Span, and Kumo cloud.
- Assessing the strength of the trend: Observing the lines and clouds in the indicator. Traders can assess the strength of the current trend.
- Identify entry and exit points: It not only provides buy and sell signals but also helps traders identify entry and exit points within a given trend.
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- Create clear support and resistance zones: Made up of Senkou Span A and Senkou Span B. Create support and resistance zones based on historical data.
- Determining the Long-Term Trend: When Senkou Span A is above Senkou Span B and the cloud is expanding, this usually indicates a strong uptrend. Conversely, when Senkou Span A is below Senkou Span B and the cloud is narrowing, a strong downtrend can be expected.
- Provides long-term buy/sell signals: When the closing price is above the cloud, it is a strong buy signal. Conversely, when the closing price is below the cloud, it is a strong sell signal. This helps traders make long-term trading decisions with confidence.
- Identify stop loss and take profit points: The Ichimoku cloud bands provide information about support and resistance levels. Helps traders identify stop loss and take profit points effectively.
- Easy to read and apply: Despite its many components, but it can be read and applied relatively easily. Once the trader has a good understanding of how it works.
Conclude
Finally, what is Ichimoku? It is not just a technical analysis tool. It is also a multi-dimensional system that provides a comprehensive view of market trends and trading signals. So through the above article, we hope Crypto Trading has provided readers with a clearer view of Ichimoku. Let’s follow Crypto Trading to update more useful information about the virtual currency market.
Frequently Asked Questions
What is the purpose of using Ichimoku?
It is used to identify market trends and generate buy/sell trading signals. Evaluate the strength of the trend determine stop loss and take profit points.
Who can use Ichimoku?
It can be used by everyone, from beginner to professional traders. However, a basic understanding of technical analysis and financial markets is required.
What are the main components of Ichimoku?
Includes the cloud (Kumo), Tenkan-Sen, Kijun-Sen, Senkou Span A, Senkou Span B and Chikou Span.
