QUESTION - WHAT ARE THE BEST FOREX TRADING STRATEGIES?
2ND ICHIMOKU TREND FOLLOWING TRADING STRATEGY
ICHIMOKU SETTING CHANGES
Kijun Sen Blue line to Red Line
Tenkan Sen Red line to Blue Line
This will match Ichimoku settings for MT4 & 5
Step One: Using Ichimoku Indicator to Find the Uptrend or Downtrend
Since this is a trend following strategy the first thing that needs to be identified is a trend. Do this on the one day, or four-hour time frame. These time frames will give you the best opportunity to identify a trend.
In our example trade, we see a downward trend with an upper trendline of resistance.
Drawing trend lines is one of the simplest ways to find a trend. Draw the trend line where there is support or resistance. Our example trade has three different levels of resistance to confirm this downtrend.
This trading strategy will always go in the direction of the trend. So an uptrend will ALWAYS be a BUY. A downtrend will ALWAYS be a SELL. This strategy uses all of these tools to identify if a trend will keep going and gets you into the uptrend or downtrend.
Step Two: Ichimoku Trading System The Tenkan Sen/ Kijun Sen Lines Cross
This next step using the Trend Following Trading Strategy, I will explain what criteria are needed for a trade entry.
Just to keep you on track, on the Tenkan Sen lines are Blue, Kijun Sen lines are Red. This crossing signal is going to tell you whether there is a strong bullish trend or a bearish trend.
When the Tenkan Sen line will cross below the Kijun Sen line, then this will give you an indication that there is a bearish trend.
You can see in our example trade the lines clearly cross which is our indication that this bearish downtrend is strong.
These lines are designed to do that very thing when they cross each other.
After the cross happened the Red line (Kijun) is now above the Blue line (Tenkan). That means that the trend is going to keep heading downwards. This is not an indication that the trend is breaking.
This was used on a four-hour chart. This chart is the best time frame to use because it gives you a good overall picture of how the last few days have gone as far as it trending.
In this timeframe, The lines need to cross either in the Kumo, which in the picture above is the orange area, or right below the cloud in this example. This was a sell signal because the trend was bearish while the Tenkan Sen line crossed below the Kijun Sen line in the senkou span area (Kumo).
Note* If the lines cross above the Kumo area in a downtrend, do not buy/sell. The opposite can also be applied to a downtrend. If the lines cross above the Kumo area in a downtrend, do not sell/buy. The reason for this is because this would be a weak signal that the trend will keep going up or down. The trade must always be made to go in the direction of the trend.
Recapping our rules using the Trend Following Trading Strategy, these three things must happen in order to enter a trade using the Ichimoku Indicator.
Identify the trend. This needs to be an upward or downward trend. The trade must go the direction of the trend.
Tenkan Sen line needs to cross Kijun Sen line.
When the two lines cross, they need to cross in one of these two specific areas. The first place would be in the Kumo area. The second will depend if its an upward or downward trend. In an upward trend, they need to cross above the Kumo area. During a downward trend, they need to cross below the Kumo area.
Note* This strategy is a trend following strategy. It is to help you identify a trend and identify that the trend will keep going either upward or downward.
Step 3: Determining an entry point Trend Following Trading Strategy
Determining an entry point should be very easy to do now. This is because once the Tenkan sen line crossed with the Kijun sen line either in the Kumo or just above or below on the four-hour time frame.
You can use the four-hour chart to enter and exit. Or you can drop down to a 1-hour chart for entry and exit.
I used the 4H to enter and exit on this example trade. But here is how to use a 1-hour chart for both.
Now, simply drop down to a one-hour time frame chart and enter the trade. You may check other time frames, but there really is no need since you have already followed the rules to enter the trade on the four-hour time frame. This is just to give you a better perspective on where you are entering.
Step 4: Stop Loss point
Stop loss is always important to have in case the trade goes in the wrong direction and you are now stuck in a pickle whether to end the trade early or end it too late and lose it all!
So we need a stop loss to help us out. Do this on the four hour time chart to see when the last areas of support or resistance were.
There need to be two or more points of resistance or support. In the example below, you see that there were support levels. So in this example, it will go just below them.
Step five: Exit Strategy
The exit strategy using the Trend Following Trading Strategy will wait until and trend starts moving the wrong direction and the lines cross again. I used the 4-hour chart to exit my trade. It is recommended to monitor this on the one-hour time frame to get the most accurate reading for this particular strategy.
The reason for this is that the trend is most likely coming to an end.
The trend can come back up, but once the lines cross over again it is time to exit the trade.
As you can see in the example the trend was slowly going back down. In the rules of this strategy, you will exit the trade if the lines cross over again.
So a trade may be 2 hours, 10 hours, 3 days or even a week! It depends on what the chart tells you and if it continues to follow the rules of the strategy.
Conclusion
The Trend Following Trading Strategy only uses this one indicator. That makes you focus on this indicator and does not make you have to keep checking others to see what they are telling you.
It may seem complicated at first with all of the different colored lines, clouds, and so on, however, when you break it down with this simple strategy, it makes it so much easier to understand.
Make sure you remember to only be risking no more than 2% of your account! No matter how confident you are, you should always follow this to maximize your account.
Thank you for reading the Trend Following Trading Strategy that uses the Ichimoku Indicator to help you gain a massive amount of pips at a time!
ICHIMOKU SETTING CHANGES
Kijun Sen Blue line to Red Line
Tenkan Sen Red line to Blue Line
This will match Ichimoku settings for MT4 & 5
Step One: Using Ichimoku Indicator to Find the Uptrend or Downtrend
Since this is a trend following strategy the first thing that needs to be identified is a trend. Do this on the one day, or four-hour time frame. These time frames will give you the best opportunity to identify a trend.
In our example trade, we see a downward trend with an upper trendline of resistance.
Drawing trend lines is one of the simplest ways to find a trend. Draw the trend line where there is support or resistance. Our example trade has three different levels of resistance to confirm this downtrend.
This trading strategy will always go in the direction of the trend. So an uptrend will ALWAYS be a BUY. A downtrend will ALWAYS be a SELL. This strategy uses all of these tools to identify if a trend will keep going and gets you into the uptrend or downtrend.
Step Two: Ichimoku Trading System The Tenkan Sen/ Kijun Sen Lines Cross
This next step using the Trend Following Trading Strategy, I will explain what criteria are needed for a trade entry.
Just to keep you on track, on the Tenkan Sen lines are Blue, Kijun Sen lines are Red. This crossing signal is going to tell you whether there is a strong bullish trend or a bearish trend.
When the Tenkan Sen line will cross below the Kijun Sen line, then this will give you an indication that there is a bearish trend.
You can see in our example trade the lines clearly cross which is our indication that this bearish downtrend is strong.
These lines are designed to do that very thing when they cross each other.
After the cross happened the Red line (Kijun) is now above the Blue line (Tenkan). That means that the trend is going to keep heading downwards. This is not an indication that the trend is breaking.
This was used on a four-hour chart. This chart is the best time frame to use because it gives you a good overall picture of how the last few days have gone as far as it trending.
In this timeframe, The lines need to cross either in the Kumo, which in the picture above is the orange area, or right below the cloud in this example. This was a sell signal because the trend was bearish while the Tenkan Sen line crossed below the Kijun Sen line in the senkou span area (Kumo).
Note* If the lines cross above the Kumo area in a downtrend, do not buy/sell. The opposite can also be applied to a downtrend. If the lines cross above the Kumo area in a downtrend, do not sell/buy. The reason for this is because this would be a weak signal that the trend will keep going up or down. The trade must always be made to go in the direction of the trend.
Recapping our rules using the Trend Following Trading Strategy, these three things must happen in order to enter a trade using the Ichimoku Indicator.
Identify the trend. This needs to be an upward or downward trend. The trade must go the direction of the trend.
Tenkan Sen line needs to cross Kijun Sen line.
When the two lines cross, they need to cross in one of these two specific areas. The first place would be in the Kumo area. The second will depend if its an upward or downward trend. In an upward trend, they need to cross above the Kumo area. During a downward trend, they need to cross below the Kumo area.
Note* This strategy is a trend following strategy. It is to help you identify a trend and identify that the trend will keep going either upward or downward.
Step 3: Determining an entry point Trend Following Trading Strategy
Determining an entry point should be very easy to do now. This is because once the Tenkan sen line crossed with the Kijun sen line either in the Kumo or just above or below on the four-hour time frame.
You can use the four-hour chart to enter and exit. Or you can drop down to a 1-hour chart for entry and exit.
I used the 4H to enter and exit on this example trade. But here is how to use a 1-hour chart for both.
Now, simply drop down to a one-hour time frame chart and enter the trade. You may check other time frames, but there really is no need since you have already followed the rules to enter the trade on the four-hour time frame. This is just to give you a better perspective on where you are entering.
Step 4: Stop Loss point
Stop loss is always important to have in case the trade goes in the wrong direction and you are now stuck in a pickle whether to end the trade early or end it too late and lose it all!
So we need a stop loss to help us out. Do this on the four hour time chart to see when the last areas of support or resistance were.
There need to be two or more points of resistance or support. In the example below, you see that there were support levels. So in this example, it will go just below them.
Step five: Exit Strategy
The exit strategy using the Trend Following Trading Strategy will wait until and trend starts moving the wrong direction and the lines cross again. I used the 4-hour chart to exit my trade. It is recommended to monitor this on the one-hour time frame to get the most accurate reading for this particular strategy.
The reason for this is that the trend is most likely coming to an end.
The trend can come back up, but once the lines cross over again it is time to exit the trade.
As you can see in the example the trend was slowly going back down. In the rules of this strategy, you will exit the trade if the lines cross over again.
So a trade may be 2 hours, 10 hours, 3 days or even a week! It depends on what the chart tells you and if it continues to follow the rules of the strategy.
Conclusion
The Trend Following Trading Strategy only uses this one indicator. That makes you focus on this indicator and does not make you have to keep checking others to see what they are telling you.
It may seem complicated at first with all of the different colored lines, clouds, and so on, however, when you break it down with this simple strategy, it makes it so much easier to understand.
Make sure you remember to only be risking no more than 2% of your account! No matter how confident you are, you should always follow this to maximize your account.
Thank you for reading the Trend Following Trading Strategy that uses the Ichimoku Indicator to help you gain a massive amount of pips at a time!
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