Ichimoku Cloud - An All in One Strategy

١٠ فبراير ٢٠٢٢

GME

The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction. It does this by taking multiple averages and plotting them on a chart. It also uses these figures to compute a “cloud” that attempts to forecast where the price may find support or resistance in the future. ~Investopedia.com


Ichimoku can be a strong tool (or set of tools, really), to help with entering only the safest plays, as well as providing the confidence to stay in them.

Using GME from 2/8/22, for example:

Using the 15 minute chart, you wouldn't expect a long trend from the setup, but it did provide an opportune entry with plenty of confirmation.

Lagging Span (Purple) - Lags behind price by 26 bars. Above the cloud is bullish, and below is bearish.

Price exited the above the cloud, which is a buy signal.

Conversion Line (Green) broke above the Baseline (Red), which is a buy signal.

Conversion Line (Green) rose sharply, which signals a bullish trend.

Price and all signals occurred above a green cloud, which is also bullish.

All these signals together gave confirmation to go long on GME at around 11:00am EST. For greatest confirmation, a trader should not enter the trade on simply 1 or 2 signals, though this may be useful for scalping opportunities. The true purpose of Ichimoku Clouds is to identify a possible trend, confirm the trend, enter the trade, and stay in the trade as long as the trend has strength.

As price remains above the Conversion Line (Green), the Conversion Line is also very distanced from the cloud, and the cloud remains green, the bullish trend is still continuing.

Entry levels for this trend would be testing support of the Base Line (Red) and the top of the cloud itself. Though loss of those level indicate the trend is weakening.

Try the Ichimoku Cloud on this chart using multiple time frames to see what you might expect price action to do, and how you might trade or avoid certain setups.

Have fun!

Exit strategies should also be in place, and profits should be taken at predefined levels when trading short-term trends.