Cryptocurrency trading, in general, is quite similar to stocks, currency, or commodity trading. Market participants utilize various techniques and strategies to maximize their profits. Some strategies rely on on-chain analysis which is exclusively presented in the blockchain and cryptocurrency industries. But the most popular way of analyzing the market is still the technical analysis which includes thousands of strategies that use numerous indicators for correctly predicting price movements in the future.

If you haven’t yet developed your cryptocurrency trading strategy and are looking for indicators that will help you to do so, we got something for you.

Ichimoku Cloud indicator

Ichimoku is the collection of technical analysis tools combined into one comprehensive indicator. It has multiple uses like finding support and resistance points, giving entry and exit signals, and determining the current strength of a trend. By using values received from multiple moving averages, the indicator forms a “cloud” that traders can use to find resistance and support points or determine the current trend.

The indicator itself was created by Goichi Hosoda, mostly for predicting movements of the Japanese Nikkei index. Hosoda was improving and constantly developing his indicator and showed it to the public only after 30 years of development.

Ichimoku indicator trading strategy

First of all, before using the indicator you will need to set it up properly. The original settings of the Ichimoku Cloud are 9, 26, 52, 26. For trading on the cryptocurrency market, you will need to change those to 20, 60, 120, 30. The settings differ due to the difference in trading hours between the stock and cryptocurrency markets. Since cryptocurrencies are decentralized assets, you can trade them 24/7 while stocks are being traded on specified days and hours only.

Buy and sell signals

The main buy signal when trading with Ichimoku is entries and breakouts from the cloud.

You can see in the example that we are opening a position once price breaks through and enters the cloud which becomes a signal of a potential trend retrace which exactly happened after. You can also buy and hold currency while it breaks through the upper border of the cloud.

Support and resistance

After buying an asset you will also need to know when to sell it, but sometimes it might be tricky even with the Ichimoku Indicator. Depending on your risk management you can personally decide what signal to consider as a sell alert or stop-loss. Ichimoku cloud can show you both support and resistance points and we recommend you to use them as your main selling point.

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