How to use Ichimoku on Block Option? You want to optimize your trading? We will help you. Ichimoku is a technical analysis method that builds on candlestick charting to improve the accuracy of forecast price moves. It was developed in the late 1930s by Goichi Hosoda. A Japanese journalist who used to be known as Ichimoku Sanjin.
The Signals – How to use the Ichimoku indicator to find trades on Block Option
1. The Cloud: long term trend, resistance and color
With the help of the Ichimoku Cloud, traders can easily filter between longer term up and down trends. When price is below the Cloud, it reinforces the downtrend and vice versa. During strong trends, the Cloud also acts as support and resistance boundaries and you can see from the screenshot below how price kept rejecting the Cloud during the trend waves.
Thus, the Cloud is ideal when it comes to filtering between bullish and bearish market phases. However, as most momentum indicators, the Ichimoku Cloud loses its validity during range markets.
2. The faster Conversion and Base lines signals
The Conversion and Base lines are the fastest moving component of the Ichimoku indicator and they provide early momentum signals. In the screenshot below we marked different points with the numbers 1 to 4 and we will now go through them to understand how to use the Conversion and Base lines:
1) The Conversion line crosses above the Base line which is a bullish signal. At that time, price was also trading above both lines which confirms the bullishness. Price dipped back into the Cloud for a moment, but found support. This could have been seen as an entry.
2) Price started to violate the Base line (yellow) which is a warning signal of a trend shift. The Conversion and Base lines also crossed into a bearish setup, further confirming the momentum shift. Finally, price entered the Cloud validating the change.
3) Price strongly crossed below the Conversion and Base lines and the Conversion line also crossed the Base line; both are bearish signals. At the same time, price was trading below the Cloud. All those signals confirm a strong downtrend and could have been used as a sell entry.
4) Price started to violate the slower Base line which is an early warning signal. Then, the Conversion and Base lines kept crossing each other, which further confirmed that momentum was shifting. Eventually, momentum died off and price consolidated sideways.
Conclusion: The Ichimoku indicator is a solid trading framework
Overall, the Ichimoku framework is a very solid, all-in-one indicator that provides a lot of information at once. As we have shown, there is no secret when it comes to using and interpreting the Ichimoku indicator and the individual components are very closely correlated to trading based off of moving averages. Nevertheless, the Ichimoku indicator definitely has its place and traders who decide to follow such a trading strategy can create a robust framework. We also highly encourage to combine the Ichimoku indicator with other tools such as basic support/resistance principles, price action and chart pattern reading and, potentially, other indicators.
Please keep follow us to read more valued information about trading.
Click to visit Block Option Trading