Ichimoku Kinko Hyo, also known as the Ichimoku Cloud or simply the Ichimoku, is a technical analysis tool used in the forex market to identify trends and support and resistance levels. The Ichimoku was developed by Japanese journalist Goichi Hosoda in the late 1960s and was introduced to the public in his book, “Ichimoku Kinko Hyo,” which was published in 1969.
What is the Ichimoko Scalping Strategy?
The Ichimoku is a comprehensive technical analysis tool that consists of five lines, or “clouds,” which are plotted on a chart to provide a visual representation of the current and future market trend, as well as support and resistance levels. The five lines are the Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and Chikou Span.
The Ichimoku Scalping Strategy is a popular technique that utilizes the Ichimoku Cloud to identify short-term buying and selling opportunities in the forex market. This strategy involves looking for the interaction between the different lines of the Ichimoku Cloud to identify entry and exit points for trades, here are three key points that support the Ichimoku Scalping Strategy:
- The Ichimoku Cloud provides a comprehensive view of the market trend and supports and resistance levels, making it an effective tool for identifying potential entry and exit points for trades.
- The Tenkan-sen and Kijun-sen lines, also known as the conversion line and base line, respectively, can be used to identify trend strength and direction. When the Tenkan-sen line is above the Kijun-sen line, it indicates an uptrend, and when it is below, it indicates a downtrend.
- The Senkou Span A and Senkou Span B lines, also known as the leading span A and leading span B, respectively, form the “cloud” portion of the Ichimoku Cloud. When the Senkou Span A line is above the Senkou Span B line, it indicates an uptrend, and when it is below, it indicates a downtrend.
Ichimiko Scalping Strategy
Buy Signal
- The Tenkan-sen line crosses above the Kijun-sen line, indicating an uptrend.
- The price action is above the cloud, indicating bullish momentum.
- The Chikou Span, which is the current price plotted 26 periods in the past, is above the price action, indicating support.
Sell Signal
- The Tenkan-sen line, signaling a downtrend, has crossed below the Kijun-sen line.
- Bearish momentum is indicated by the price action being below the cloud.
- Resistance is indicated by the Chikou Span being below the price action.
Ichimoku Scalping Strategy Pros & Cons
Pros
- The Ichimoku system provides a comprehensive and holistic view of the market, which can help traders make informed decisions and avoid getting caught in false moves.
- The Ichimoku system uses multiple indicators to confirm the strength of a trend, which can help traders ride a trend for a longer period of time and potentially capture larger profits.
- The Ichimoku system can be applied to various time frames and market conditions, which allows traders to adapt their strategies and adjust their risk management accordingly.
Cons
- The Ichimoku system generates signals based on the interaction between multiple moving averages, which can be lagging indicators. This means that the signals may come too late to be useful for scalping purposes, where traders aim to profit from small price movements in a short period of time.
- The Ichimoku system uses multiple parameters, such as the length of the moving averages and the distance between them, which need to be carefully adjusted based on the specific market conditions and the trader’s objectives. This can be a time-consuming and complex process, which may not be suitable for fast-paced scalping.
- The Ichimoku system generates a large number of signals, including both bullish and bearish ones. This can make it challenging to identify the most reliable signals and filter out false ones, especially in a high-frequency trading environment like scalping.
Conclusion
The Ichimoku Scalping Strategy is a popular technique that utilizes the Ichimoku Cloud to identify short-term buying and selling opportunities in the forex market. By looking for the interaction between the different lines of the Ichimoku Cloud, traders can identify entry and exit points for trades based on the trend strength and direction, as well as support and resistance levels. While the Ichimoku Scalping Strategy has its pros and cons, it can be a useful tool for traders looking to make quick trades based on short-term market movements.
For example, a trader using the Ichimoku Scalping Strategy may look for a buy signal when the Tenkan-sen line crosses above the Kijun-sen line and the price action is above the cloud, and look for a sell signal when the Tenkan-sen line crosses below the Kijun-sen line and the price action is below the cloud.
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Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
