Ichimoku Cloud : Triple Confirmation
Hey Guys,
Welcome back to another important part of knowing indicators from close. Today, we will talk about 'Ichimoku Cloud'. It is a collection of many indicators used to determine support and resistance in a given graph. It also tells us about the direction of the Market's Momentum.
So, let's take a look at what we are learning today. It includes everything we need to know about this particular indicator.
Points to be covered:
- Introduction
- How to apply this indicator
- It's Formula
- How does it work?
- Convenience while using other indicators
- Pros And Cons
Introduction
It is an indicator that proved to be its best at determining the support and resistance in the meantime. We can access its advantageous method in almost every segment like Options, Intraday etc. We can guess the price in both equity and commodity trades just with the help of 'Ichimoku Cloud'.
Well, coming to the point, it was developed by a Japanese journalist named 'Goichi Hosoda'. I advise you to sit straight and ignore all other unnecessary thoughts to focus on this topic.
How to apply this indicator
Well, let's break this topic into points to understand it quickly and easily.
- Firstly, open your Demat trading account.
- Now, go to the indicators table and select 'Ichimoku Cloud' from it.
- Now all the settings should be at default.
Let's know some of the default settings:
Conversion Line Period = 9
Base Line Period = 26
Leading Span B Period = 52
Lagging Span Period = 26
Note: You can change the details for your convenience.
- Now, after that, you will find this indicator in your graph.
- You may find it difficult to understand its settings and all that, but you should not be afraid of that. Let's take a look at some crucial formulas to understand them easily.
Conversion Line = (9-PH + 9-PL)/2
Base Line = (26-PH + 26-PL)/2
Leading Span A = (CL+ Base Line)/2
Leading Span B = (52-PH + 52-PL)/2
Lagging Span = close plotted 26 periods in the past.
where:
PH = Period High
PL = Period Low
CL = Conversion Line.
How does it work?
Firstly, talking about the lagging span is a crucial thing to know. By default, the lagging span is 26 candles back from the present candlestick in the graph. If you open the day-candlestick pattern, you will find the lagging span 26 days back from today's candlestick. Now, when we come to the topic 'confirmation', it provides three confirmations. Those three confirmations are as follows:
- Confirmation 1: When the conversion line crosses the leading span B from below, it is a sign of a bullish trend.
- Confirmation 2: If the lagging span is above the current market then the market is going to be bullish.
- Confirmation 3: If the leading span is below from current market, it is also a signal of a bullish market.
Convenience while using other indicators
It is very convenient to use this indicator with other indicators together in a graph. You can use other Indicators with this indicator such as RSI, MACD, Supertrend, Bollinger Bands and many more. By doing so, you can increase the 'accuracy' and 'confirmation'.
Pros and Cons
Pros
- Easy to use.
- Easy to apply.
- High accuracy.
- Tripple Confirmation.
Cons
- Higher accuracy but not 100%
- One moment of negligence may turn into a loss.
Thank You,
