Nowadays, the boom in financial investment fields has helped users develop effective tools to aid in making predictions, correct investment decisions on trading platforms. In previous articles, Vietnam-ustrade.org has shared some supporting indicators like this. Today, another supporting tool developed in Japan called Ichimoku Cloud, or Ichimoku Kinko Hyo, will be introduced.
What is Ichimoku Cloud?
Ichimoku Cloud is a shortened term from the candlestick analysis tool named Ichimoku Kinko Hyo, discovered and developed by Goishi Hosoda. It is a very useful market analysis tool, built from 1930 but remained relatively obscure until the 1960s when users became aware of its existence.
This support method consists of 5 different elements. Therefore, Ichimoku Cloud can provide useful information such as: Market trend, Momentum and duration of the trend, or indicate reliable market resistance levels and also generate appropriate trading signals.
Features of the Ichimoku Cloud
As mentioned above, Ichimoku Cloud is formed from 5 elements or lines on the chart:
- The red conversion line (Tenkan-sen): Calculated by the highest high and lowest low over 9 periods.
- The blue base line (Kijun-sen): Calculated by the highest high and lowest low over 22 periods.
- The first leading span (Senkou Span A): Calculated by the values of the two indicators above over 26 periods.
- The second leading span (Senkou Span B): Calculated by the lowest and highest prices over 52 periods.
- The green line (Chikou Span): Current closing price of the trading market.
These factors combine and counteract each other to create the common Ichimoku Cloud support tool. Helping users during volatile market times, difficult decision-making in investments.
Some easy steps to install Ichimoku Cloud
To use Ichimoku Cloud, users need to install this support tool on the platform. The installation process is quite simple:
Step 1: Open MT4 software on the system platform
Step 2: Go to add utilities menu under “Insert” tab and select “Indicators”
Step 3: Then, select “Trend” and click on “Ichimoku Kinko Hyo” to install Ichimoku Cloud.
Step 4: The system will display a window. Your task is to set up each detail to complete the installation. There are 3 parts to configure:
- Parameters section: This allows users to customize three parameters of the basic lines: Tenkan-sen, Kijun-sen, and Senkou Span B. Each line has a different calculation method, so users need to apply the calculation method to set the indicators. Tenkan-sen parameter is 9, Kijun-sen is 26, and Senkou Span B is 52.
- Colors section: As the name suggests, setting here is straightforward. Users just select colors for easy viewing and distinguishing the chart lines.
- Visualization section: This is the final setup stage. Users will set display time for the Ichimoku Cloud chart. This can be adjusted freely, either matching your trading time frame or as a bit longer during volatile market periods.
With these four simple steps, users can successfully install the Ichimoku Cloud tool. To understand more about how to use it, let’s review some methods and effective ways to analyze with Ichimoku Cloud below!
Some tips for effective use of Ichimoku
The setup method may seem complicated, but using Ichimoku Cloud is quite straightforward. Users just need to remember and follow some principles of this support tool, such as:
- If the market price is above the cloud, Ichimoku Cloud signals that the market will continue to rise according to the current trend.
- If the market price is below the cloud, Ichimoku Cloud signals a continuation of the downward trend.
- Finally, if the market is highly volatile, oscillating without a clear direction, it’s better not to open new positions during this phase.
Based on these three principles, traders should make buy signals when the market breaks above the Ichimoku Cloud, indicating an uptrend. Conversely, a break below signals a downtrend.
However, the financial market has large fluctuations, and tools are only aids, not absolute measures. Users should not overly rely on Ichimoku Cloud alone to avoid heavy losses. Combining it with other tools and technical indicators for market analysis is advisable. Additionally, enhancing your financial knowledge can support more effective buy and sell decisions in the market.
Conclusion
Vietnam-ustrade.org has summarized and analyzed some relevant information and provided guidelines for effectively using the Ichimoku Cloud market analysis tool. We hope this article will give traders a comprehensive, objective, and detailed overview of this effective support tool. With the insights shared, you might find your own direction and develop a new strategy in this highly profitable yet volatile financial investment market.
