BEST Ichimoku Cloud Strategy for Daytrading Forex & Stocks (Ichimoku Explained)

hey traders so in this video i'm going to be explaining everything you need to know about the ichimoku cloud indicator in less than 10 minutes and as usual i'm not going to waste your time explaining the formulas and the calculations of the indicator this video is purely about explaining the different techniques and how to use the indicator so that you can immediately implement it in your trading arsenal right after watching this video so without further ado let's get started so the ichimoku cloud is an indicator that shows trends and momentum on the market however unlike a normal momentum indicator like the macd crossover that often displays false signals when the market is on a range the ichimoku cloud instead filters them out using what's called the kumo cloud we'll get to that in a minute so if you search ichimoku indicator on tradingview you'll get this a bunch of messy lines so at first glance the ichimoku indicator may look messy and complex but it's actually very very simple once you know how to use it so let's break down the parts so to make it simple i'm disabling all the parts except the conversion line which is also known as the cankinson and the baseline which is also known as the kijunsen so these two lines acts very similar to a moving average crossover the blue line acts like a faster moving average it is more sensitive to price action and is used to identify the short-term trend and the red line acts like a slower moving average it is less sensitive to price action and can be used to identify a more longer term trend direction so the way we combine these two lines is if the blue line crosses below the baseline it means you take a short position and if the blue line crosses above the baseline you take a long position next we have these two lead lines or also known as the senkus bands these two lines form what's called a kumo cloud so the kumo cloud is what stands out in the ichimoku indicator because it can help filter out noises while still displaying trends usually when the price is on a trend the cloud will also heading towards that direction for example if the price is on a strong bullish trend the direction of the cloud will also follow upwards the color of the clouds can also determine the overall direction of a trend if the cloud is colored green which is formed when leading span a crosses above leading span b this indicates that the price is on a strong upwards momentum and if the cloud becomes a red color which is formed when leading span a crosses below leading span b it indicates that the price is on a strong downwards momentum so the kumo cloud has a couple of rules if the candle is above the cloud you only take long signals and if a candle is below the cloud you only take short signals and if the candles are inside the cloud you don't take any positions so now we combine all of them together if the price is above the clouds and the conversion line crosses above the baseline you take a long position it's the same thing with a short position when a candle is below the clouds and the conversion line crosses below the baseline you take a short position and remember do not take any trades if the price is inside the clouds lastly we have the lagging span or also known as the chiku span so the lagging span is optional some traders use it some traders don't the lagging span can be used as a second confirmation for a trend for example let's say you receive a bullish signal from the ichimoku cloud the lagging span can help confirm that that is a strong bullish signal so if the lagging span is also heading upwards this further confirms that the price is on a strong uptrend and it's the same with downtrends as well if the lagging span is heading downwards this further confirms that the price is on a strong downtrend so even though you already know how to use the ichimoku indicator i can guarantee that most of you will still make mistakes when trading it because the indicator looks so messy so i suggest this indicator on tradingview by skyrock signals it helps us determine when a bullish or bearish signal appears by giving signals like this so now it's a lot easier for us to know when to enter long or short positions you can also use the clouds to determine your stop loss for example if the ichimoku displays a short position you can set your stop loss right below the clouds here so if the price breaks through the clouds you close your position this can be used as a safety if the price reverses to the other direction so that you can close your trade early and avoid losing a lot of money [Music] next let's talk about the different types of strategies that you can use when trading the ichimoku cloud so the first we have the baseline crossover strategy the baseline crossover only uses the conversion line and the baseline if the conversion line crosses upwards you take a long position and if it crosses downwards you take a short position the next strategy is called the kumo cloud crossover so in this strategy you simply take long positions if the price crosses above the clouds and you take short positions if the price crosses below the clouds the kumo cloud can also be used to combine with other indicators and it can act as a baseline to see the overall trend direction for example the chicken money flow and the kumo cloud combination so you take long positions if the tchaikon money flow closes above the zero line while the candle is still above the kumo cloud and you take short positions if the money flow crosses below the zero line and the price is still below the clouds another strategy that you can use is by pairing up the kumo cloud with another indicator such as the parabolic sar so actually i already traded this indicator combination 100 times in my other videos so be sure to check that out as well so how this works is you basically take long positions if the parabolics are is below the candles while still being above the clouds and you take short positions when the parabolic sar is above the candles while the candle is below the clouds and don't take any positions if the candle is inside the clouds so to further confirm the trend you can add the lagging span to further confirm the overall trend direction so if the ichimoku parabolic star displays a long position while the lagging span is heading upwards that is a good sign that the price is on an uptrend so overall the ichimoku clouds is one of those indicators that you can easily combine with other indicators you can also utilize it with your current trading strategy and my tip for you is just because a method is famous doesn't mean that's the only way to use the indicator you don't need to follow the original rules of the indicator if you test out your own techniques you may find winning techniques that you can use for a lifetime and if you want to see how a back testing process looks like you can check out my other backtesting videos as well so i just showed you the different ways of using the htmoko cloud that you can implement right now and all i ask for in return is a very small favor of liking the video and subscribe to the channel it literally takes only two clicks and it means so much to me so thank you guys for watching and i'll see you in the next video