How to Trade the Ichimoku Kinko Hyo Method in Binary Options

What is the Ichimoku Kinko Hyo?

The Ichimoku Kinko Hyo is a trend-following trading indicator used in binary options trading. 

It comprises several lines and components named in Japanese – translated to English as in the brackets.

• Tenkan Sen (Turning Line or Conversion Line) – a line that shows the average of the highest high and the lowest low of the last 9 periods.
• Kijun Sen (Standard Line or Base Line) – a line that shows the average of the highest high and the lowest low of the last 26 periods.
• Chikou Span (Lagging Line) – a line that shows the closing price shifted left or back in time for 26 periods.
• Senkou Span A (First Leading Line) – a line which shows the average of Tenkan Sen and Kijun Sen shifted right or into the future by 26 periods.
• Senkou Span B (Second Leading Line) – a line which shows the average of the highest high and the lowest low of the last 52 periods shifted right or into the future for 26 periods.
• Kumo (Cloud) – the area between Senkou Span A and Senkou Span B.

 

What is the Ichimoku Kinko Hyo Trading Method?

The Ichimoku Kinko Hyo Trading Method is a day trading technique that capitalizes on the Ichimoku Kinko Hyo trading indicator.

The trading method was authored by Goichi Hosoda and is simple, unique, and profitable.

So how do the Ichimoku Kinko Hyo trade setups look like?

They are simple setups you can easily identify as follows:

• Bullish Setup: The price is trading above the Kumo or cloud but not far from Tenkan Sen and Kijun Sen. Tenkan Sen crosses from below to above the Kijun Sen as the Chikou Span crosses from below to above the price. Senkou Span A crosses from below to above Senkou Span B and Tenkan Sen, Kijun Sen and Chikou Span should not be within the Kumo or cloud.
• Bearish Setup: The price is trading below the Kumo or cloud but not far from Tenkan Sen and Kijun Sen. Tenkan Sen crosses from above to below the Kijun Sen as the Chikou Span crosses from above to below the price. Senkou Span A crosses from above to below Senkou Span B and Tenkan Sen, Kijun Sen, and Chikou Span should not be within the Kumo or cloud.

Are you a trader in Olymp Trade and wondering how you can trade the Ichimoku Kinko Hyo method?

Well, in this post, you will learn exactly how to set up and trade the Ichimoku Kinko Hyo method in Olymp Trade. Let us proceed without further ado.

 

Setting Up and Trading the Ichimoku Kinko Hyo Method in Olymp Trade.

Far from the basics now.

This section focuses on the dynamics which you need to understand in order to set up and profitably trade the Ichimoku Kinko Hyo trading method.

The Ichimoku Kinko Hyo trading indicator looks complex and difficult to set up and trade in Olymp Trade, but I will demystify all that here.

It is actually simple and easy once you understand it.

Here are the simple steps to setting up and trading the Ichimoku Kinko Hyo method in Olymp Trade:

1. Set Up the Indicator.

The Ichimoku Kinko Hyo trading method capitalizes on the Ichimoku Kinko Hyo trading indicator.

That means that the only indicator this trading strategy requires is the Ichimoku Kinko Hyo.

Some trading platforms refer to the indicator as to the Ichimoku Cloud.

Click on the indicators’ tab and choose Ichimoku Kinko Hyo or Ichimoku Cloud from the list.

You do not need to do any adjustments but apply the indicator in default settings.

However, take note of the differences in color among the various lines and components.

Here are the Ichimoku Kinko Hyo components to take note of their colors:

• Tenkan Sen.
• Kijun Sen.
• Chikou Span.
• Senkou Span A.
• Senkou Span B.
• Bullish Kumo.
• Bearish Kumo.

Each of the lines must have a color different from the rest.

Additionally, how the cloud looks when Senkou Span A is above Senkou Span B (Bullish Kumo) is different from how it looks when A is below B (Bearish Kumo).

Therefore, take note and know the color of each component as specified.

2. Observe the Price Relative to Kumo.

The scanning for trading signals has begun.

While scanning for trading signals, we only expect two outcomes – either a bullish or a bearish trading signal.

The first step in scanning for trading signals is observing how the price behaves in relation to the Kumo or the cloud.

You remember that Kumo was one of the components of the Ichimoku Kinko Hyo indicator, besides the several lines, right?

Well, if the price is in an uptrend strong enough, it should shift from trading below to above the Kumo or cloud.

On the other hand, if the price is in a downtrend strong enough, it should shift from trading above to below the Kumo.

Those are the two expected outcomes. Either of them will occur and that sets the stage for what to expect in the subsequent steps.

Did you get either the price trading above the Kumo or the price trading below the Kumo?

Whichever of the two, proceed to the next step.

3. Observe the Price in Relation to Tenkan Sen and Kijun Sen.

In the second step, did the price prove to be above or below the Kumo? It doesn’t matter. In this step, your roles are just two:

• To ensure that the price is still trading in the same direction you established in relation to the Kumo.
• While doing so, the price should not be far from Tenkan Sen and Kijun Sen.

The striking role here was to ensure that the price is close to Tenkan Sen and Kijun Sen.

Also Read: – Top 5 RSI Trading Strategies that You Should Use in 2021.

If that is the case, then proceed to the next step.

However, if the price is too far away from such two lines, then the signal becomes null at this point.

4. Observe Tenkan Sen Relative to Kijun Sen.

If the signal has passed all the tests until where the price was close to Tenkan Sen and Kijun Sen, then you can proceed with this step.

Here you are observing how Tenkan Sen behaves relative to Kijun Sen.

This should also be respective to whether the initial orientation of the signal was bullish or bearish.

Well, did the price show a bullish orientation by shifting from below to above the Kumo?

Did the price also remain close to Tenkan Sen and Kijun Sen?

If yes to these two questions, then you expect the Tenkan Sen to cross from below to above Kijun Sen.

Did the price, on the flip side, show a bearish inclination by shifting from above to below the Kumo?

Further, did the price remain close to Tenkan Sen and Kijun Sen?

If yes to both questions, then you expect the Tenkan Sen to cross from above to below Kijun Sen.

If anything else short of what you expect, as specified above, happens, then the signal is distorted.

However, if what you expect as stipulated above happens, you can proceed to the next step.

5. Observe Chikou Span in Relation to the Price.

Has the signal passed all the tests including that on the previous step?

Then the next test to put it into is checking the behavior of Chikou Span relative to the price.

A bullish signal which has passed all the tests up to step 4 must be followed by Chikou Span crossing from below to above the price.

On the other hand, a bearish signal which has passed all the tests up to step 4 must be followed by Chikou Span crossing from above to below the price.

The above specification must happen if you will proceed to the next step.

If it does not happen in the respective signals, then you either must wait a little bit or the signal got distorted.

6. Observe Senkou Span A Relative to Senkou Span B.

The next test is checking how the Senkou Span A relates to Senkou Span B.

The two must relate in a particular manner in a bullish signal and in the opposite manner in a bearish signal.

For the bullish signal which has passed all the tests up to step 5, Senkou Span A must cross from below to above Senkou Span B.

However, for the bearish signal which has passed all the tests up to step 5, Senkou Span A must cross from above to below Senkou Span B.

That is what must happen for the respective signals in this step.

Failure of this to happen may spell doom to the signal or mean that you must wait a bit longer.

7. Observe the Kumo in Relation to Tenkan Sen, Kijun Sen and Chikou Span.

To this far, you have established either a good bullish or a good bearish signal.

That is by exposing the signal to all the tests from step 2 to step 6 and ensuring that it passes all the tests.

Now, what happens in this step is not different for the two signals but applies across the two signal types.

Therefore, for either signal, Tenkan Sen, Kijun Sen, and Chikou Span lines must not be within the Kumo or cloud.

If they happen to be within the cloud, then the whole signal, even if it met all other conditions, becomes null.

8. Enter Buy or Sell Position.

Have all the 6 conditions been met for either bullish or bearish signal? If yes, then entering a buy position for the bullish signal or a sell position for the bearish signal is the next thing to do.

All the following conditions must be met before entering a Buy position:

• The price must shift from trading below to above the Kumo or cloud.
• The price must not be far from the Tenkan Sen and Kijun Sen.
• Tenkan Sen must cross from below to above Kijun Sen.
• Chikou Span must cross from below to above the price.
• Senkou Span A must cross from below to above Senkou Span B.
• Tenkan Sen, Kijun Sen, and Chikou Span lines must not be within the Kumo or cloud.
• You should use bullish candlestick patterns as entry triggers.

On the contrary, All the following conditions must be met before entering a Sell position:

• The price must shift from trading above to below the Kumo or cloud.
• The price must not be far from the Tenkan Sen and Kijun Sen.
• Tenkan Sen must cross from above to below Kijun Sen.
• Chikou Span must cross from above to below the price.
• Senkou Span A must cross from above to below Senkou Span B.
• Tenkan Sen, Kijun Sen, and Chikou Span lines must not be within the Kumo or cloud.
• You should use bearish candlestick patterns as entry triggers.

9. Adjust Stop Loss and Take Profit.

Adjust Stop Loss depending on the candlestick pattern which triggered your entry.

For most candlestick patterns, the Stop Loss for buy positions is usually set just below the low of the trigger candlestick.

The Stop Loss is also set just above the high of the trigger candlestick for sell positions.

Take Profit, however, can be projected using previous Kumo levels which act as support or resistance.

If entering a buy position, look at the recent high levels of the Kumo or cloud and consider them as resistance level to take profit there.

If entering a sell position, on the other hand, look at the recent low levels of the Kumo or cloud and consider them as support to take Profit there.

Wrapping Up.

Just as I told you, the Ichimoku Kinko Hyo trading indicator looks complex but once you understand it, it becomes the easiest thing you have ever come across. See how simple the strategy based on the indicator has turned out to be.

Note that the formation of a perfect signal does not need to necessarily occur in the order of steps listed above. Provided all the 6 conditions are met, regardless of the order then an entry confirmed by bullish or bearish patterns accordingly, enter a position.

Set up the Ichimoku Kinko Hyo trading indicator in your Olymp Trade account. Proceed to trade the Ichimoku Kinko Hyo method and take your fair share of the money that the asset market has to offer.

Happy Trading!

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