Thursday, October 24th, 2013 by Tim Lanoue
Developing and executing a trading strategy with the Ichimoku indicator is easier than one may think. One of the nice things we learned in the last article is that this indicator can be used alone which is nice when you don’t want to a large amount of indicators crowding your trading software. The Ichimoku indicator is an extraordinary indicator to use for any form of online trading however it is most popular with binary options. So let’s dig a little bit deeper and learn how we can implement this unique indicator.
Ichimoku Cloud Strategy
One thing to keep in mind is that to start off with this indicator may seem to crowd your trading screen up however once you get accustomed to it you will realize how easy this indicator points out potential trading signals. Another important factor to keep in mind is that like with any indicator the Ichimoku indicator will not provide 100% success rate so make sure you practice good money management skills. In addition, it is important to remember that in real life if you want to become better at something you need to be consistent and practice, so when it comes to using this indicator those two actions are vital. Below are four pictures to help you better understand the basics and an easy strategy to use when using this binary options indicator.
In the picture above we have a series of bearish candles moving in the general direction of the Kumo cloud. We must wait for two things to happen before we can place our trade. First, our candle must protrude in or outside of the cloud or bounce off of it. In this instance, we have bearish candles going into the Cloud, so before we place our trade we must wait for a second criterion to be met. That would be we need our candle to close and we need a candle of the same color form next, this acts as a confirmation that the trend is still going in our predicted direction. After those two conditions are met we can place our trade, in this case it is a sell trade that ended up as a win.
Similar to the first picture we have a bearish entry about to take place. We see our red candle close and our confirmation candle start inside the red candle, confirming for us that the trend will more than likely go down so we place our put trade and come out successful yet again.
On the other hand now in this picture we have both bullish set ups. The two criteria’s that must be met are still into play here so in the first example to the far left we have a big green candle protruding out of the Kumo cloud. So next we wait to see if our second candle is a bullish candle as well, in this case it is so we go ahead and place a buy trade predicting that the price of the asset will continue to climb higher. The second entry of this trade is a similar set up however our bullish candles are merging into the cloud. So we wait for our two conditions to be met and we place another up trade.
In this last picture we have an interesting set up taking place. The entry to the far left of the picture is an example of a bounce where our asset “bounces” off in the other direction off of the cloud. In this particular set up we have a bearish candle followed closely behind by a bullish candle. Since the candle next to our bullish candle is also a bullish candle we can go ahead and place a buy trade because we are predicting that the price of the asset will continue to rise. In the second entry we have a small series of green candles indicating that the buyers are in control. We wait for our green candle to fuse into the cloud while waiting for our confirmation candle to appear then we place our buy trade.
The Ichimoku Cloud Strategy is a relatively easy one to implement but many traders will avoid this indicator because it crowds their trading software. A couple of advantages about this indicator is that it produces very clear signals where entries can be made while also allowing a large variety of trading strategies that can applied later down the road. If you have any questions please feel free to join our forum and leave any online trading question for our experts to answer or leave a comment below.