Trading crypto using Ichimoku Cloud – part 2/2
Market structures that suit the Ichimoku Cloud
Ichimoku Cloud is mostly useful in trending markets. It won’t perform well or produce much relevant info in ranging markets. When the market is ranging, the cloud will constantly be swapping between red and green, yielding very little valuable information. The same will happen on short time frames, which is why Ichimoku Cloud shouldn’t be used on these.
Ichimoku cloud strategies that involve other indicators.
There quite a lot of trading strategies that involve Ichimoku Cloud. However, the important thing to understand is that, even in trending crypto markets, Ichimoku Cloud is almost never used alone. Typically, traders will combine it with other indicators.
Indicators that pair well with the Ichimoku Cloud should provide some way of identifying support-resistance levels based on the asset volume. Using a volume-based indicator alongside Ichimoku is beneficial because the cloud takes price action cycles into consideration while disregarding volume completely.
Popular indicators to use with Ichimoku in cryptocurrency trading
Volume
StochRSI, MACD or any other momentum oscillators
Fibonacci retracements
Bollinger Bands
Ichimoku Cloud cryptocurrency settings
Many people ask if they should use alternative settings for Ichimoku Cloud for trading cryptocurrency markets.
Ichimoku Cloud works with timely moving averages, so with crypto trading, it follows reason to set timespans considering the fact that cryptocurrencies are being traded 24/7/365.
While the traditional Ichimoku cloud settings are (9, 26, 52, 26):
9 would represent a week and a half of regular trading
26 is the number of trading days in a typical month (30 minus 4 Sundays)
52 represents two months of trading days
Traders should create a special Ichimoku Cloud setting for cryptocurrencies as the market is open 24/7 (20, 30, 120, 60):
7+3.5 = 10 (due to the low volume on Sunday), or double that for longer-term trend capture
30 days in a month rather than 26
2 trading months in crypto are 60 days instead of 52 days
However, some traders reject this special Ichimoku Cloud crypto setting. Their reasoning behind that is that the cloud period lengths are meant to capture a certain time period and that it doesn’t matter whether it represents a week. This opinion is less popular as it seems a bit ignorant to disregard the day of the week movements and how certain days influence the market.
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