The Ichimoku Cloud for CryptoCurrency Trading

Ichimoku Kinko Hyo translates to “one glance equilibrium chart”. The indicator was developed by Goichi Hosoda, a Japanese journalist, and published in his 1969 book. The Ichimoku Cloud system, a lesser known trading tool, was not taught during my equity trading course at university, stumbling upon it whilst trading after graduating. The cloud system has now become my go-to technical indicator. Its best aspect, as the translation suggests, shows what type of trade you should be in and potential targets within seconds of looking at the chart.

This article will describe each element of the Ichimoku Cloud, settings to use and how to trade it in a clear, concise, dot-point style.

Creating the Cloud System

The cloud can be broken into 6 parts, using the following formula to calculate each element using prescribed settings (I.e. 9, 26, 52, 26) (referencing article image):

• Tenkan-sen, Fast EMA = (9-period high + 9-period low) / 2 Blue line
• Kijun-sen, Slow EMA = (26-period high + 26-period low) / 2 Red Line
• Cloud, Y-Periods ahead (last number) Red/Green Cloud
• Sekkou Span A = (Tenkan + Kijun) / 2 Green Cloud Line
• Sekkou Span B = (52-period high + 52-period low) / 2 Red Cloud Line
• Lagging span, Chikou Span = Close price plotted 26 days behind Light Green Line

The Tenkan and Kijun lines are great as they incorporate the simple moving average trading strategy. The cloud leads price, as the Kijun draws 50% fibonacci levels ahead of time, whilst the Chikou span lags price; helping to determine when a trend is potentially reversing or stagnating.

Settings to use

• Crypto: 10, 30, 60, 30 (Double it: 20, 60, 120, 30) Crypto markets never close

Why double? Doubling your cloud settings improves probability of trade signals, reducing “noise”. Lower settings can be useful as they capture trend reversals more quickly, however you will have to more vigilant with your trading. The cloud system is designed to capturing 80% of price movements (I.e. 80/20 rule). I have found that using stochastics is useful for predicting trend reversals.

Trading Timeframes

It is important to understand what type of trading you will be doing; I.e. How long are willing to hold positions for. It must be noted that before conducting any trades, that the highest timeframes always wins, and you should adopt a top-down approach. Strong signals occur when all time intervals line up (Weekly, Daily, 4-Hour, 1 Hour)

• Buy & Hold — Weekly
• Swing — Daily
• FX — 4-hour
• Day trading — 5 min charts

Bullish Ichimoku Checklist

Làm cách nào để biết xu hướng giá tăng? 4 đặc điểm sau đây cần phải xuất hiện và có thể dùng 4 đặc điểm này mà ngược lại thì xu hướng giá giảm

• T-K cắt nhau: Khi đường T(nhanh) cắt trên đường K(chậm)
• Giá nằm trên đám mây
• Lagging span nằm trên giá và đám mây
• Đám mây tăng

Entry/exit signals and price targets

Adding to the bullish checklist, below are a few extra points of interest when interpreting the cloud system for entry/exit signals and price targeting:

• Flat Cloud patterns = price target
• Cloud or Kumo twist: Price, more often than not, trends through a zone when the cloud change form
• Lagging span in price: Potential exit signal, trend reversing/stagnating
• Kumo/Cloud Edge-to-edge trade: A high certainty trade when you get a candle close in the cloud; entry signal (as seen in the article photo)
• Buy on Kijun Bounce, 50% Fibonacci level; entry signal
• C-Clamp suggests heavily overbought and T-K lines are wide apart, exit signal
• Self draws ahead of time (~predicting future), drawing support and resistance lines as the Kijun line is a 50% Fibonacci retracement level.
• A thin cloud is a good sign of momentum. When the cloud starts to increase in size, this shows that momentum is slowing. You can use the volume indicator for confirmation.

It wouldn’t be complete without mentioning partnering technical indicators. To improve the probabilities with each trade, I have found that using RSI (14), MACD histogram (12, 26, 10) and Full Stochastic (13, 3, 3) have paired very well when using the cloud system.