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Unlocking the Power of Ichimoku Cloud

The Ichimoku Cloud stands out as a unique case where a single indicator suffices to formulate a comprehensive trading strategy. Paradoxically, it often remains underrated due to its perceived complexity, thereby missing the attention of many traders.

Nonetheless, seasoned financial experts frequently incorporate this indicator into their trading arsenal because it provides precise and timely signals.

As a rule, the Ichimoku Cloud is not readily available on every trading platform. However, the broker Olymp Trade has thoughtfully included this indicator as a standard feature in its toolkit, underscoring the company’s dedication to assisting clients in achieving success within the financial markets, especially in the realm of binary options.

Appearance and settings of the indicator

Let’s begin by highlighting that the Ichimoku indicator was created during the first half of the previous century. At that time, calculations were carried out manually, as online trading emerged much later. The mastermind behind this unconventional technique was the Japanese trader Goichi Hosoda, who was more widely recognized among stock market participants by the pseudonym Sanjin Ichimoku. It is in his honor that the advisor we are discussing today bears its name.

Now, when we examine the Ichimoku Cloud, it does indeed appear intricate and sophisticated. This is precisely what can deter newcomers, causing them to shy away from using this tool in practical trading.

Nevertheless, once you grasp its core components and operational principles, you’ll discover an almost perfect tool for trading in financial markets.

It’s important to mention that in this article, we won’t delve into the formulas for calculating each line, as modern software handles these calculations for us. All you need to do is click on the indicator’s name to add it to your workspace.

Let’s clarify the functions of the various lines:

  • Tenkan Sen (red) and Kijun Sen (blue) represent two moving averages, responsible for depicting short-term and medium-term price changes, respectively.
  • Chinkou Span (green) is a moving average that trails the price chart with a slight delay, serving the purpose of confirming the direction of the current trend.
  • Senkou Span “A” and Senkou Span “B” are two pivotal lines that proactively collaborate to form the characteristic cloud (shaded area) associated with the indicator’s name. It’s worth noting that these lines work ahead of the curve, enabling you to anticipate price movements.

Regarding the instrument’s parameters, it is advisable to retain the default settings (9, 26, 52) across all timeframes. Similarly, it is recommended not to alter the line colors to avoid confusion.

How to trade using Ichimoku Cloud?

When working with the Ichimoku Cloud, you have the option to utilize multiple signals simultaneously.

  • One such signal is the crossing of Tenkan Sen and Kijun Sen, which stands out as the most straightforward indicator. If the red (representing the short-term) line intersects with the blue (representing the medium-term) line, it suggests a logical course of action: consider purchasing the contract in the direction of this intersection.

  • The cloud created by Senkou Span “A” and Senkou Span “B” serves as a valuable tool for trend identification. When the price resides above this cloud, it indicates an upward trend, whereas if the price is below it, it signifies a downward trend. Consequently, traders may consider purchasing the contract when there’s a rebound from the cloud in line with the prevailing trend.

  • When the price is situated within the cloud, it’s advisable to refrain from taking any market actions. Conversely, when the price exits the shaded area and breaches one of the lines comprising the cloud, it is advisable to consider purchasing a contract in alignment with the breakout direction.

In conclusion, it’s evident that the Ichimoku Cloud isn’t as complex as it may initially seem. The array of signals discussed here equips traders with an effective means to profit in the binary options market, as well as in various other financial exchanges.

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