Ichimoku Kumo Cloud Trading
Archive : Ichimoku Kumo Cloud Trading
What is the Ichimoku Trading System?
Ichimoku Kinko Hyo is a technical analysis approach that uses candlestick charting to increase the accuracy of price forecasts. Goichi Hosoda, a Japanese journalist known as Ichimoku Sanjin, devised it in the late 1930s. He spent thirty years developing the process before publishing his findings in the late 1960s.
Ichimoku Kinko Hyo translates to ‘quick look at the balance chart’ or ‘one glance equilibrium chart’ and is frequently referred to as a ‘one glance cloud chart’ due to the peculiar ‘clouds’ that exist in ichimoku charting.
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The ichimoku chart’s main components
Tenkan-sen
Tenkan-sen calculation for the last 9 periods: (highest high + lowest low)/2.
It serves largely as a signal line as well as a minor support/resistance line.
Kijun-sen
For the previous 26 periods, the Kijun-sen was calculated as (highest high + lowest low)/2.
This serves as a confirmation line, a support/resistance line, and a trailing stop line.
The span of Senkou Senkou spans (Tenkan-sen + Kijun-sen)/2 calculated 26 periods ahead.
This line, also known as the leading span 1, forms one edge of the kumo, or cloud.
B Senkou span
Senkou span B is computed as (highest high + lowest low)/2 over the last 52 time periods and shown 26 times forward.
This line, also known as the leading span 2, creates the other edge of the kumo.
Kumo
The gap between senkou spans A and B is known as the Kumo cloud. The cloud edges indicate present and probable future locations of support and resistance.
The form and height of the Kumo cloud alter in response to price variations. This height symbolizes volatility since bigger price fluctuations build thicker clouds, resulting in stronger support and resistance. Prices may and do burst through thin clouds because they provide very little support and resistance.
Markets are generally bullish when Senkou Span A is higher than Senkou Span B, and vice versa when markets are bearish. Traders frequently search for Kumo Twists in future clouds, which occur when Senkou Span A and B trade positions, indicating a likely trend reversal.
In addition to thickness, the cloud’s strength may be determined by its angle; upwards for bullish and downwards for bearish. Kumo Shadows are clouds that form behind the price.
Chikou range
Chikou span is calculated by projecting today’s closing price back 26 days on the chart.
It is also known as the trailing span and is utilized as a support/resistance assist.
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