Ichimoku is on its own, a money management based trading strategy. That is why we have chosen to follow it with only small modifications. As you might be aware, the default settings for the Kumo, Tenkan sen, Kijun sen and Chikou Span are 9, 21 and 52 periods. However, we have set up a 13, 34 and 89 periods. The difference resides on that the latter are numbers from the Fibonacci series, and we believe they represent the market sentiment (formation of support and resistances) with more clarity.
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Our strategy is simple and we will show it with examples. We generate three classes of signals for trading:
1.- Weak signals
2.- Neutral signals
3.- Strong signals
Position sizing will be determined by the nature of the signal (i.e. weak, neutral or strong).
1.- Weak signal
Issued when the Tenkan Sen crosses the Kijun Sen on the opposite side of the cloud (e.g. price action on the bull side of the cloud and the cross occurs below the cloud). The Chikou span should agree with this strategy (e.g. must be below the price action if signal is bearish and above the price action if signal is bullish). See figure below:
Issued when the Tenkan Sen crosses the Kijun Sen inside the cloud. The signal will be released once the price close below or above the cloud. The Chikou span should agree with the strategy (e.g. must be below the price action if signal is bearish and above the price action if signal is bullish). See figure below:
Issued when the Tenkan Sen crosses the Kijun Sen on the same side of the cloud (e.g. price action on the bull side of the cloud and the cross occurs above the cloud). The Chikou span should agree with this strategy (e.g. must be below the price action if signal is bearish and above the price action if signal is bullish). See figure below: