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Friday, April 20, 2018

Important Forex trade System successfully Elevate Trader customers Reviews

How to use the Ichimoku indicator as a complete trading system

This is an indicator coming from Japan, as its name suggests, and which has the distinction of being able to be used as a complete trading system: The indicator Ichimoku well controlled enough indeed to its followers for practice trading on a daily basis, from trading decision making to goal setting.

However, when one begins to be interested in this indicator, one is often repulsed by its apparent graphic complexity (many lines on the graph). But once things get better, there is really nothing complicated, and the use of the Ichimoku indicator remains within the reach of anyone who takes the time to study it.

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The different elements that make up the Ichimoku indicator

The Ichimoku indicator, by its full name Ichimoku Kinko Hyo, was developed by Japanese Goichi Hosoda. It is a simple and complete system that contains several informations.

The indicator consists of 5 lines and allows to detect three types of information: the trend, the supports and resistances, and the trading signals.

These are lines that correspond to the median level between the lowest and the highest of a certain period, they may be related to moving averages but they are not. The calculation formula is as follows: (Higher + Lower) 2. The division is done on 2 and not on the number of periods as for a moving average.

In addition to the mathematical difference, on the graph they form landings (horizontal straight lines) if there are no new low or high points over the period, which, as we shall see later, represent levels supports and resistances very useful.

The peculiarity of these two lines is that they are projected in the future and like Tenkan and Kijun, they also form landings. They work together but their calculation methods are different.

The Senkou Span A, called SSA, is an average of Tenkan and Kijun lines projected 26 periods forward, in the form of extension. The calculation formula is as follows: (Tenkan + Kijun) / 2. Senkou Span B, the so-called SSB, is the median of the highest and lowest of the last 52 periods, and projected 26 periods in the future as an extension.

The calculation formula is as follows

It is calculated as Tenkan and Kijun but over 52 periods and it is projected 26 periods forward.

The area between these two lines represents what is called the cloud, which is usually colored on the graph.


Interpretation and application to trading

First, it is customary in the presentation of the flag to indicate that the intersection of Tenkan and Kijun gives a trading signal like moving averages, but these two lines are NOT moving averages and such signals are often misleading, especially on short time units. On Ichimoku, the interest is elsewhere, it is the price line that will be monitored.

To analyze and follow the trend

When prices move above the cloud, the trend is bullish. And when they move below the cloud, the trend is bearish.

Crossing the cloud from one side to the other will indicate a change of trend in the studied time unit.

The finer the cloud, the more likely the trend is to reverse easily, and vice versa.

To locate the supports and resistances

Each of 4 lines apart from the Lagging Span, represents a level of support or resistance potential. If the curve forms a horizontal line, the level will be stronger and more difficult to pass, and the longer the line, the more it will be true.

In addition to the levels directly below or above the current prices, previously trained bearings are also likely to represent levels of support or resistance.

To obtain trading signals

The trading signals are given by the breaking of the different lines.

The breakout of the Tenkan is a first warning that the trend could reverse, the Kijun will confirm if this is a real reversal or only a rebound. Subsequently, the final confirmation is given by crossing the cloud.

Lagging Span comes into play to bring additional confirmation or to call for caution if it is likely to encounter supports or resistances. We look first where the prices are and then we confirm with Lagging Span.

For example we can have a configuration in which prices come out of the cloud but block without apparent obstacle, and it will be interesting to see where is the Lagging Span which will probably be under resistance.

Objectives and stops can be set on different levels of levels.

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