Ichimoku Cloud is an instrument that evokes contradictory opinions among traders. On the one side, it is a very informative indicator that is capable of giving clear signals. But on the other side, it is a complex system that can take more than one day to research. This makes indicator not the best choice for beginners.
In this review you will look at the main characteristics of the Ichimoku Cloud, that is base component of terminal instruments from Pocket Option. Also, here will be given general recommendations that will allow all traders to use it in the work, regardless of trading experience.
As for the popularity of this indicator, it is often used for analysis and is even part of many strategies. This algorithm was invented back in the 1930. Ichimoku Cloud was actively used in the securities market and commodity exchanges of that time. However, the basic parameters of the indicator have not changed over more than 80 years of use. And the trading signals that it forms are still a weighty argument for opening a position.
Graphic features of indicator and recommendations for its settings
Ichimoku Cloud is a trend indicator. Therefore, it is displayed directly on the price chart. This instrument consists of 5 lines, and the shaded distance between two of these lines is called a “cloud”. For more detailed acquaintance with the settings of Ichimoku Cloud user needs to click the icon of pencil in the row with the indicator name.
The calculation of the standard parameters is as follows:
- The Tenkan Sen (TS) line is yellow, it is a simple moving average with a period of 9. Traders determine the current trend using this line.
- The line Kijun Sen (KS) is red. Moving average 26 period.
- Senkou Span A (SSA) is green and Senkou Span B (SSB) is orange. These 2 lines form the cloud. The first line is the average distance between the TS and KS, and also has a shift of 2 candles forward. And the second line is shifted to the same distance and is the average value of price, taken for the third interval.
- Chikou Span (CS) is blue. CS can serve as an indicator of the expected level of closure of current candles.
At first glance, everything looks rather complicated. However, fortunately, to use the indicator in practice, the trader doesn’t need to carefully study the settings. Below is the optimal trading scheme for the Ichimoku Cloud on different timeframes.
Immediately it should be noted that Ishimoku Cloud isn’t effective in the small timeframes. Therefore, it is better not to use this instrument for scalping. But, if the user is not an adherent of fast trading, then it is recommended to use the different settings that depend on the time interval of the lines Tenkan Sen, Kijun Sen and Senkou Span B:
- From an hour to 4 hours: 9; 26; 52.
- From day to week: 12; 24; 120.
- From a week to a month: 120; 240; 480, respectively.
Using Ichimoku Cloud
In this section, the easiest ways to trade using the above indicator will be considered. This technique is suitable for both professional traders and beginners.
One of the most popular signals is the intersection of the lines Tenkan Sen and Kijun Sen. So, if TS crosses KS from top to bottom, then trader must to click a DOWN option. This signal is also called the “dead cross”. And if the intersection occurs from the bottom up (referred to as the “golden cross”) then trader must to choice the contract UP.
Another equally significant signal is a rebound or price break through the boundaries of the cloud.
If the graph is under the lines and bounces from one of the borders down, then trader must to click a DOWN option. And, if on the contrary, the trader must to choice UP.
In case of confident penetration and consolidation of the price above or below the cloud, the trader should open a deal in the direction of the breakdown.
In addition, this tool can quite clearly indicate a general market trend. So, the direction of the Tenkan Sen line reflects the presence of a trend: up – ascending, down – descending, sideways – flat. And Kijun Sen characterizes the strength of the current movement. If the candles are above the line, then the likelihood of continued growth is great, and if vice versa, then the price will most likely continue to decline.
Based on the foregoing, a trader will be able to fairly effectively use Ichimoku Cloud and trade in electronic contracts, even without going into the properties of the indicator. And those users who devote a week or two to an in-depth study of the indicator will receive an indispensable assistant in analysing the market situation and a reliable basis for their trading system.