Crypto-Trading with Ichimoku Cloud … and the world of virtual trading assistants


A popular indicator is the Ichimoku Kinko Hyo, an all-in-one trading system developed in the 1940s by Goichi Hosoda, a Japanese journalist. Its name translates to “balance at a glance” and allows traders to trade breakouts, identify support and resistance levels, and assess the markets’ group thinking behavior. Trading is not for the faint hearted, even seasoned investors succumb to sudden market movements and price drops.

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Shaurya Malwa


Cryptocurrency enthusiasts often face a conundrum when they look to cryptocurrency as a viable investment. An eternal question remains: invest and forget, or trade the famous price fluctuations for even more gains?

Academic research shows that a simple strategy of buying and holding Bitcoin over the past six years would have yielded 1690% for investors. However, using a long-short trading approach would have generated gains of over 2,500% as a minimum, or even 5,000% using a well-adjusted strategy.

Needless to say, it’s easy to get wowed by the prospect of trading cryptocurrencies with these stats in mind.

But as simple as it sounds, trading is not for the faint hearted, even seasoned investors succumb to sudden market movements and price drops – look no further than the “Black Thursday” event in March. this year that caused two very popular crypto funds, Cryptolab Capital and Adamant Capital, to fall back overnight with their millions of dollars falling victim to the market.

This is where a strategy becomes important. One could either take a fundamental approach to the crypto market – looking at macroeconomic factors, correlations with US stock indices, or market movements led by Bitcoin miners – or choose a technical strategy, that is – say indicators and a chart reading to calculate the probabilities of a market. movement and places trades accordingly.

A popular indicator is the Ichimoku Kinko Hyo, an all-in-one trading system that was developed in the 1940s by Goichi Hosoda, a Japanese journalist. Its name translates to “equilibrium at a glance” and allows traders to trade breakouts, identify support and resistance levels, and generally assess the group thinking behavior of the markets.

“The Ichimoku Cloud has always been a complete framework: it allows trend analysis, tells the trader when to stay completely out of the market and provides clear signals with a high probability of success. »Declared the president Zen of MachinaTrader. “This combination allows the trader to act impartially and mechanically in the market. And that also means that Ichimoku Cloud is great for creating an automated strategy. “

This is what the Ichimoku Kinko Hyo, or colloquially, the Ichimoku Cloud looks like:


Discouraged? Don’t be. The tool is easy to read and determine once each individual component is identified.

First, there is the “Kumo” – the cloud: the large green and red areas in the chart below, where the price always seems to go and either set a new trend or be rejected. Markets are generally directionless and sideways when trading in the cloud, which means traders generally sit and avoid placing trades while the price is inside the cloud.


The cloud is simply a calculation of the support and resistance balances using the previous price action from past “x” periods. Generally, the longer the period “x”, the less likely there is a “false” signal (although absolutely nothing is absolutely certain in the markets).

Playing in the Cloud is easy. Traders can be “long” or bet on the price rise when prices break the cloud, and “short” or bet on the downside if prices break the cloud. A green cloud is a “support” area, an area where price should see buying and subsequently continue to trend up. Vice versa when the Cloud is red.

In addition, the thicker the Cloud, the stronger its support / resistance. A thin cloud is an indication that the market is unlikely to see much support / resistance as the price approaches the cloud. Therefore, the thickness of the cloud is an important consideration when negotiating the “Kumo”.

Next is the Tenkan sen, or the “conversion line” as shown (in blue) in the table below:


The Tenkan sen calculates the average of the highest and lowest over the last “x” number of candles. Some traders believe that the Tenkan sen offers better support / resistance points than a simple moving average.

Here is a 21-period Tenkan sen and a 21-period simple moving average for comparison:


Note that when the Tenkan sen is flat, it indicates a situation with no trend in the market over the past 21 candles. While a tilted Tenkan sen shows the direction and relative momentum of price action over the past 21 candles.

A moving average does not respond in this way, making the Tenkan sen a line that acts both as support / resistance and as a directional indicator.

Third, the Kijun sen or “base” line, which like the Tenkan sen is calculated from the highest and lowest average over the previous “x” number of candles. Why a duplicate? Because this component is calculated over a longer period of time than Tenkan Sen, thus providing a second “slower” Tenkan Sen for comparison, as well as a longer support / resistance indicator.


One possible strategy – used by some traders – is to view Sen Tenkan and Sen Kijun in the same way as the popular “moving average crossover”. Trade long when the faster Tenkan Sen crosses over the slower Kijun Sen (indicating an uptrend) and trade short when the cross occurs to the downside.

Finally, the Chikou span, or the “late” line. This calculates the current price and moves it back an “x” number of candles. The main signal given is the “trend confirmation”. Once the Chikou expanse shifts from top to bottom (or bottom to top), the Ichimoku cloud signals the direction of the trend.


In the chart above, the lag line breaks through the Kumo, providing a strong buy signal to traders. The move is said to be a “bullish” Kumo breakout, while the opposite of this – the Chikou breakout below the cloud – is usually a “bearish” signal where traders could sell and offload positions.

With these four components explained, the Ichimoku Cloud should now be easier to understand and read. And here’s why it’s considered a “single, integrated strategy”: A glance at the chart provides the trader with an indication of the trend (or lack thereof), support and resistance, breakouts potential and similar past “configurations”. making this indicator available free of charge in any trader’s toolbox.

Automate the Cloud?

Ichimoku Cloud trading signals do not necessarily require manual execution. Services like MachinaTrader, an online trading platform that allows traders to automate their strategies. A trader can code the logic of his strategy through the dashboard, or choose from already coded algorithms (including Ichimoku Cloud), backtest its effectiveness before deploying it live in the market.

Traders can activate a terminal on the MachinaTrader dashboard and code their own complex trading strategies, set backtesting parameters and much more. Traders can monetize successful strategies by making them available to other platform users. Also, it allows you to choose to have a machine learning bot to oversee certain strategies. Bob the trading robot can recommend improvements, leading to a more profitable trading strategy with suggested optimal settings, for various market conditions, for indicators like the Ichimoku Cloud.

The future of finance is here.

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