General Rules of Trading Ichimoku

The technical indicator, Ichimoku Kinko Hyo, is great for determining support and resistance levels and the time to enter the market when the lines are broken through.

Some rules to adhere to:

  1. Kumo
    • If the price level is inside the kumo, the trend is unclear. The kumo edge will form the support and resistance levels. Take cue when it breaks through in either direction.
  2. Kijun sen
    • Use Kijun sen as a gauge of the market movement. If price level is above this line, the prices are likely to continue going up. If price level cross this line or cuts the (candle cuts line), the trend is like to change. Alternatively, if Tenkan sen cuts Kijun sen, trade it in the same direction.
  3. Tenkan sen
    • The Tenkan sen shows the market trend. If the Tenkan sen rises or falls, the trend will be shown by the direction of the line. When it is horizontal, it suggest that price level may be consolidating.
  4. Chikou Span
    • Chikou Span can be easily use to check if it cuts the price level upwards or downwards. Trade it using the direction that it cuts.

 

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