Trading The Cloud – Part TwoWelcome to Part Two of my ichimoku trading guide - Trading theCloud. In the first part of the guide I introduced you to the Kumo cloud,sorry it was so short, but I wanted to keep it bite sized I think it iseasier for you to digest and simpler to teach.I want to go into a little bit more detail about how price reacts to theKumo cloud and how this gives the trader a very strong idea on howprice is moving, and how you can start to predict future moves andtrades just by quickly glancing at the chart.Ok so this leads me to the next partIdentifying Trend Directionwith the Kumo CloudThe first thing we need to know as we look at the ichimoku chart is whatdirection the price is moving.Is it Bullish (Moving up) or Bearish (Moving down)We do this by looking where price is in relation to the Kumo CloudIf price is above the cloud then the sentiment is Bullish, if price is belowthe sentiment is Bearish.Take a look at this chart below
As you can see from the chart, it is easy to tell at a glance whether priceis in a bullish mood or a bearish mood.This is the foundation of trading ichimoku and should be the first thingyou look for before anything else. knowing the direction of the price tellsyou what type of trades to look out for.Bullish price = Only look for BUY trades, ignore any SELL tradeopportunitiesBearish price = Only look for SELL trades, ignore and BUY tradeopportunitiesKnowing the direction of the trend is vital for traders, as straight awaywe can filter out ANY fake signals and concentrate on the strongermoves. By only looking for BUY or SELL trades at any one time, wealready save a lot of analysis, and it literally takes one glance at the chartto tell us if we are looking for BULLISH trades or BEARISH trades.Kumo BreakoutEvery new trend starts with a Kumo breakout.
Before price can define a trend on either side of the Kumo, it must breakout of the Kumo Cloud, every time price breaks from the cloud, it startsa new trend and tells us what type of signal to look out for.Bullish trend = BUY signalsBearish Trend = SELL signalsTake a look at this chart belowAs you can see from the chart price enters the Kumo from the top thenmoves around inside the Kumo cloud until it finally breaks out of thebottom, thus creating a Bearish trend.The Kumo breakout is actually a trading strategy in itself, where you canopen a trade as soon as price breaks the cloud, but I will cover this whenI talk about the ichimoku trading strategies in future updates.
No Trend No TradeYou will notice there are times when price gets stuck inside the cloud,this is an area of no trend and is advised to stay away from opening anytrades until a clear trend is presented by a breakout on either side.I will cover this more in the next lesson.Until Next TimeChris(admin)