Ichimoku trading strategy is a type of technical analysis using moving averages, support and resistance levels, and momentum indicators to identify trends and generate buy and sell signals. The Ichimoku indicator was developed by Goichi Hosoda, a Japanese journalist, in the late 1930s.
The Ichimoku indicator consists of five components: the Tenkan-sen, the Kijun-sen, the Senkou Span A, the Senkou Span B, and the Chikou Span. The Tenkan-sen and the Kijun-sen are moving averages used to identify the short-term and long-term trends, respectively. The Senkou Span-A and the Senkou Span-B are support and resistance levels used to identify potential turning points in the market. The Chikou Span is a lagging indicator used to confirm the direction of the trend.
Here's a simple example of an Ichimoku trading strategy:
If the Tenkan-sen (red line) crosses above the Kijun-sen (blue line), then it is a bullish signal, and a long position should be taken.
If the Tenkan-sen crosses below the Kijun-sen, then it is a bearish signal, and a short position should be taken.
If the price is above the Senkou Span-A and Senkou Span-B, then it is considered to be in an uptrend, and further long positions should be taken.
If the price is below the Senkou Span A and Senkou Span B, then it is considered to be in a downtrend, and further short positions should be taken.
If the Chikou Span is above the price, it confirms the uptrend, and if the Chikou Span is below the price, it demonstrates the downtrend.
An Exit strategy can be added with a stop loss or profit target level.
It's important to note that this is just a simple example, and the Ichimoku trading strategy can be further customized based on the individual trader's preference, such as adding more indicators or using different parameters for the moving averages.
It's also important to test the strategy on historical data and evaluate its performance before using it in live trading. It's also important to consider adding stop loss and other risk management techniques to minimize the risk.
Get full access to all training courses.