Ichimoku Cloud Trading Strategy

Introduction

• This lecture provides a complete Ichimoku Cloud trading strategy.
• The strategy includes rules for entry, stop loss, and profit target placement.
• Ichimoku Cloud consists of a cloud extending out in front of price data and a lagging span behind it.
• Tools: Use bar replay feature or live price data to understand the cloud and lagging span positions.

Components of the Ichimoku Cloud

• Conversion Line: Blue line
• Baseline: Yellow line
• Lagging Span: Purple line, 26 periods behind the candle
• Lead Lines: Outline the cloud
• Cloud: Sets 26 periods in front of the current candle, different color indicates direction (green for long, red for short)

Trading Rules

Short Position

1. Price Close: Must be below the Ichimoku Cloud.
2. Cloud Color: Must be red 26 periods in front of the current candle.
3. Conversion Line: Must cross below the baseline (blue below yellow).
4. Lagging Span: Must cross below the cloud.

Long Position

1. Price Close: Must be above the Ichimoku Cloud.
2. Cloud Color: Must be green on the candle closing above.
3. Conversion Line: Must cross above the baseline (blue above yellow).
4. Lagging Span: Must cross above the cloud.

Entry, Stop Loss, and Profit Target

• Entry: Candle meeting all criteria (for long or short).
• Stop Loss: Short - just above the cloud; Long - just below the cloud.
• Profit Target: Typically two times the risk.

Examples and Further Guidelines

Example Analysis

• Use the bar replay to simulate scenarios and confirm criteria before executing trades.

Save from Losses

• Use lagging span as a signal to exit early:
  • In a short, if the lagging span crosses above price, consider exiting to save from loss.

Alternative Targets

• If not using 2x risk, use the baseline or lagging span relation to price to determine exit.

Conclusion

• Simplified set of rules:
  • Close above/below cloud.
  • Cloud color shift in trade direction.
  • Conversion line cross relative to baseline.
  • Lagging span cross above/below cloud.
• Common rules, not invented; showcased with examples for better understanding.

Final Note

• Simplicity in rules aids clarity in trading with Ichimoku.
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