The Ichimoku indicator is an indicator developed by Goichi Hosoda in 1930. This indicator is actually similar to the moving average (MA) indicator. It's just that there are some additional indicators that make the Ichimoku indicator more accurate and more reliable.
Usually, the Ichimoku indicator is used more often to see trends. Nevertheless, you can also use it to determine the area of support and resistance. Not only that, you can also determine the entry point by using this indicator.
Although basically similar to the 2 moving average (MA) lines combined with support and resistance lines, the accuracy of the Ichimoku indicator is fairly high. For this reason, this indicator is quite popular among traders.
Important Components in the Ichimoku Indicator
If this is your first time using the Ichimoku indicator, it's only natural that you feel a little trouble.
As an indicator, Ichimoku does look quite complicated with a few lines here and there. There are several components that you should be familiar with before you start using it. For this reason, here are some components in the Ichimoku indicator.
Ichimoku Cloud indicator
1. Tenkan-sen
This Tenkan sen line usually has a red color. Among traders, this line is also often called a trend indicator. For this reason, many traders use it to find out about ongoing trends. Utilization of the penny ten itself is the same as the moving average (MA) line.
2. Kijun sen
The kijun sen line is usually drawn in a blue line. Kijun sen is also often used as a confirmation line for the direction of the trend. In addition, this line is used to determine the level of support and resistance as well as a guide to determine the level of trailing stop.
3. Chikou span
Chikou span lines are usually depicted in green. Traders also often call it by the name of lagging line. Usually, this chikou span is used as a confirmation signal for entry.
4. Cloud or Kumo
In the Ichimoku indicator, Kumo or cloud is the core that is often used as a reference in taking positions. Kumo or cloud itself is actually an area flanked by two lines called senkou span A and senkou span B.
Traders usually use this cloud as support or resistance depending on the ongoing trend.
How to use the Ichimoku indicator
1. Activate the Ichimoku Indicator
The Ichimoku indicator is not immediately active when you first start trading. For that, you must activate it first before you can use it.
For example, in the IQ Option application you only need to follow the steps above. Select the next indicator in the indicators section, select Ichimoku Cloud. After that, the trading platform will display the indicator with standard settings.
2. Open Positions Using Tenkan-Sen as a Reference
The red line intersects the blue line from top to bottom
After the Ichimoku indicator is active, you can start using it to determine when open buy positions and when open sell positions.
There are several scenarios to choose from when using this Ichimoku indicator. One way is to utilize the Tenkan-sen line.
When the red line crosses the blue line from the bottom up, this indicates that the trend will change to ascending. This signal can be utilized by opening a buy position.
But if the opposite is true, the red line cuts the blue line from top to bottom, the trend means it will turn to bearish. You can also enter short positions.
3. Determine Entry Points by Using the Cloud as a Reference
On the Ichimoku indicator, you can also use the cloud as a signal to open positions.
The thickness of the cloud itself can be a reference to find out whether price trends will change from rising to falling or vice versa. If the green cloud looks thick, it is likely that the change in price trend will occur from the previous up to down trend, if so, you should be careful when opening an "up" position. If the red cloud is thick, then it is a sign that the price trend will change from the previous trend down to up, if so you must be careful in opening a "down" position
But if this cloud looks thin, it means there is no signal of price changes, and you are safe to open a position.
Thick and thin beginnings on the Ichimoku indicator
1. Green clouds look thick, meaning that rising price trends will change to down.
2. Red clouds look thin meaning the downward price trend will not change.
Nevertheless, that does not mean you can not take advantage of thin clouds. Because if you find a cloud like this, it could be that the trend will continue for some time to come.
4. Open a Position with the Chikou Span Line Reference
In addition to using the red lines and clouds, you can also use determining trends using the location of lines and graphs.
The way it works is, if the ichioku lines such as red lines, blue lines and clouds are above the candlestick chart it means that the price trend is down, otherwise if these lines are located below the candle graph then it indicates the price trend is rising.
In the picture above you can check the Ichimoku lines above the candlestick chart.
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