Dear Cryptuminati,
Many beginners wonder which indicators to use. That's why I started this series with the 7 best indicators. It is not just any indicators, but those that are best suited for crypto trading.
#3 Ichimoku Kinko Hyo
Today I want you to meet a crazy indicator. Ichimoku is a complete trading system from Japan. I'm sure you've seen this strange cloud before. At first glance, it causes enormous confusion and looks very complicated. Don't worry, it's very easy to interpret Ichimoku . I use this indicator primarily to detect trend changes.
My areas of application:
- Trend directions: If the course is above the cloud, this is positive. Below the cloud there is a downward trend.
- Trend strength: The thicker the cloud, the stronger the trend. A change in cloud colour must be interpreted as positive (green) or negative (red) according to the new colour.
- Entry and exit: A breakthrough in the cloud indicates a change in trend, which you can use for buys or sales.
- Stop-loss / partial sales: At the edge of the cloud or in case of a breakthrough.
Ichimoku actually consists of several lines. However, I have trimmed the indicator to the cloud visible above. For me, the Ichimoku cloud is a secret chart technical weapon! The other lines are not so important in my eyes.
Example:
In the upper chart you see two situations. The buy was made when the trend direction changed. I waited until the first candle opened in a new direction.
(1) In the first case, the trade did not work. The red cloud was very thick, which can be interpreted negatively. The course hadn't finished downstairs.
(2) The second trade was a complete success. The cloud was much thinner, so Bitcoin -2.04% could easily break through it. The cloud quickly turned green, which is another positive feature.
What's the problem?
A breakthrough through the cloud can be very dynamic. This leads to further losses. Alternatively, you can use the cloud line as an exit, but often there are turns.
For this reason you should include additional chart technical elements!
My tips for Ichimoku:
- Combine the Ichimoku cloud with trend lines ( support and resistance ). This will give you a better idea of how likely a trend change is. You can also use the trend line to buy or sell.
- Moving averages (MAs) are another trend indicator. You can use them as support. I often work with MAs 14 and 50, the classic setting is MA 50 and 200. I have linked my guide to MAs below.
- The Supertrend helps you to recognize a change of trend and to make partial sales.
- Look at the higher time level. If you speculate on a rising price in the 4-hour chart, you should look at the daily chart . There you may be able to determine a suitable price target.
Conclusion
The Ichimoku is an independent trading system. But I only use the cloud. It is a powerful weapon for trend changes. This is very interesting for crypto currencies, as a change of trend often results in larger movements. To get a good time to sell, you can also work with trend lines and MAs.
Always include other factors in the trade! This can be an indicator or a technical chart element (support, resistance, Fibonacci).
The Eye of the Cryptuminati has spoken.
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Risk note: Everything is possible, nothing is necessary. All information is not a buy or sell recommendation.