Greg Secker - Learn To Trade
Keeping trading simple is important for new traders, with risk management rules and basic indicators. The Ichimoku cloud is one type of indicator that can be used, and it has four main parts. The cloud itself acts as a filter, with long trades only allowed if the price is above the cloud, and short trades only allowed if the price is below. The chiku span can be used as an exit signal. Smart Charts offers a free 7-day trial to test out the indicator and other trading strategies.
Introduction
Traders are often drawn to complex indicators and fancy software, but it’s important to keep it simple and focus on risk management and basic indicators. However, there is one indicator that many have asked about and it’s time to dive in – the Ichimoku cloud.
What is the Ichimoku Cloud?
The Ichimoku cloud is comprised of four main indicators – the cloud itself, the kitchen sin, the tenkan sin and the chiku span. The cloud is the space between two lines and is used to filter trades. The kitchen sin and tenkan sin act as moving averages, while the chiku span acts as a breadcrumb trail of past prices.
Using the Cloud as a Filter
When price is above the cloud, only long trades are allowed and when price is below the cloud, only short trades are allowed. When price is inside the cloud, it’s best to avoid trades and if you must take a position, use half the risk you normally would. This helps to reduce the number of trades taken and forces traders to be disciplined.
Crossover Signals and the Cloud
Crossover signals between the kitchen sin and tenkan sin indicate potential buy or sell signals, but these signals must also respect the cloud. Long trades are not allowed unless price is above the cloud and short trades are not allowed unless price is below the cloud. This system helps traders avoid fake signals and stay disciplined.
Understanding the Chiku Span
The chiku span acts as a breadcrumb trail of past prices, which can be used to determine trend direction and as an exit signal. If the chiku span is above price action, the trend is deemed to be upwards and if it’s below price action, the trend is downwards. When exiting a trade, traders should wait for the chiku span to cross the price action in the opposite direction.
Examples of the Ichimoku Cloud in Action
To better understand how to use the Ichimoku cloud, it’s important to see it in action. Examples of long and short trades are provided, along with how to use the cloud as a filter and the chiku span as an exit signal.
Why Use Smart Charts?
Smart charts offers a user-friendly platform to apply the Ichimoku cloud and other indicators. In addition, a free 7-day trial is available to access trader education material in a simple and easy-to-understand format.
Conclusion
The Ichimoku cloud may seem complex, but by understanding its four main indicators and how they work together, traders can effectively filter trades and stay disciplined. While it’s important to keep it simple and focus on basic indicators and risk management, the Ichimoku cloud can be a valuable tool for traders.
