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--- trading_strategies:ichimoku_cloud [2023/10/09 17:40]
jayanthi [Defining the Indicators]
+++ trading_strategies:ichimoku_cloud [2023/10/09 17:46]
jayanthi [Strategy]
@@ Line 1: / Line 1: @@
 ====== Ichimoku Cloud ======
-===== Introduction =====
+===== What Is the Ichimoku Cloud? =====
-Even though the name implies one cloud, the Ichimoku Cloud is really a set of indicators designed as a standalone trading system. These indicators can be used to identify support and resistance, determine trend direction and generate trading signals. //Ichimoku Kinko Hyo//, the Japanese name for the technique, is translated as "one look equilibrium chart." With one look, chartists can identify the trend and look for potential signals within that trend.
+Even though the name implies one cloud, the Ichimoku Cloud is really a set of indicators designed as a standalone trading system. These indicators can identify support and resistance, determine trend direction, and generate trading signals. //Ichimoku Kinko Hyo//, the Japanese name for the technique, is translated as "one look equilibrium chart." With one look, you can identify the trend and look for potential signals within that trend.
-===== Defining the Indicators =====
+===== What Are the Ichimoku Cloud's Five Components? =====
 There are five lines on the Ichimoku Cloud chart at any given time, so let's review the indicators before looking at strategy in depth. See our ChartSchool article for [[:technical_indicators:ichimoku_cloud|a detailed article on the Ichimoku Cloud]]. The Japanese name is shown first, followed by the English translation in parentheses. This article will use the English translations.
@@ Line 23: / Line 23: @@
 On the daily chart, this line is the midpoint of the 52-day high-low range, a little less than three months. The default calculation setting is 52 periods, but it can be adjusted. This value is plotted 26 periods in the future and forms the slower Cloud boundary.
-**Chikou Span.** The chikou span, aka “lagging span,” is the current period's closing price plotted 26 days back on the chart. This line is used to show buying pressure in relation to “current” prices, possible areas of support and resistance, and trend reversals.
+**Chikou Span.** The chikou span, aka “lagging span,” is the current period's closing price plotted 26 days back on the chart. This line shows buying pressure in relation to “current” prices, possible areas of support and resistance, and trend reversals.
-===== Strategy =====
+===== Trading Strategy Based on Ichimoku Cloud =====
-Chartists use the actual cloud to identify the overall trend and establish a trading bias. Once said bias is established, chartists will wait for a correction when prices cross the Base Line (red line). An actual signal triggers when prices cross the Conversion Line (blue line) to signal an end to the correction.
+Chartists use the actual cloud to identify the overall trend and establish a trading bias. Once a bias is established, chartists wait for a correction when prices cross the Base Line (red line). An actual signal triggers when prices cross the Conversion Line (blue line) to signal an end to the correction.
-This trading strategy will set three criteria for a bullish signal. First, the trading bias is bullish when prices are above the lowest line of the cloud. In other words, prices are either above the cloud or remain above cloud support. Second, price moves below the Base Line to signal a pullback and improve the risk-reward ratio for new long positions. Third, a bullish signal triggers when prices reverse and move above the Conversion Line.
+This trading strategy will set three criteria for a bullish signal. First, the trading bias is bullish when prices are above the lowest line of the cloud. In other words, prices are either above or above cloud support. Second, price moves below the Base Line to signal a pullback and improve the risk-reward ratio for new long positions. Third, a bullish signal triggers when prices reverse and move above the Conversion Line.
 As you can see, the three criteria will not be met in just one day. There is a pecking order to the process. First, the trend is bullish as defined by the cloud. Second, the stock pulls back with a move below the Base Line. Third, the stock turns back up with a move above the Conversion Line.