What is an Ichimoku Cloud Chart?
#Futures
#K-Line Indicators
#Technical Analysis
#Advanced
Related Articles
The Ichimoku Cloud Chart is a technical analysis method that combines multiple technical indicators into one chart. It can display potential support and resistance areas, trend direction, and provides clear price behavior analysis, helping traders find the best entry and exit points.
The Ichimoku Cloud Chart was proposed by Japanese journalist Goichi Hosoda in the 1930s. After years of research and improvement in this analytical technique, it was eventually shared publicly in the 1960s, becoming a well-known indicator widely used in technical analysis today.
In MEXC's futures trading, the Ichimoku Cloud analysis indicator has been introduced. You can add this indicator to the basic K-Line chart and use it to support your daily futures trading.
1. Ichimoku Cloud Composition
The Ichimoku Cloud consists of five parts: the Conversion Line, Base Line, Lagging Span, Leading Span A, and Leading Span B.
1.1 Conversion Line: This is a 9-day moving average line. Calculation method: Conversion Line = (Highest high in 9 days + Lowest low in 9 days) / 2. It is represented by the blue line in the diagram below.
1.2 Base Line (Kijun-sen): This is a 26-day moving average line. Calculation method: Base Line = (Highest high in 26 days + Lowest low in 26 days) / 2. It is represented by the brown line in the diagram below.
1.3 Lagging Span (Chikou Span): The Lagging Span shows the current day's closing price compared to the average of the past 26 days, represented by the deep green line in the diagram below.
1.4 Leading Span A (Senkou Span A): This predicts the future trend within the next 26 days through the moving average of the Conversion Line and Base Line. Calculation method: Leading Span A = (Conversion Line + Base Line) / 2. It is represented by the light green line in the diagram below.
1.5 Leading Span B (Senkou Span B): This predicts the future trend within the next 26 days through the 52-day moving average. Calculation method: Leading Span B = (Highest high in 52 days + Lowest low in 52 days) / 2. It is represented by the pink line in the diagram below.
1.6 Cloud: The area between Leading Span A and Leading Span B.
2. Ichimoku Cloud Uses
2.1 Determining Future Trend Direction
As seen in the chart, the cloud spans the last 26 periods of the K-Line chart.
When Senkou Span A is higher than Senkou Span B, creating a green cloud, it signals a bullish trend. Conversely, a red cloud formation indicates a bearish trend. Transitioning from a red cloud to a green cloud signals a bullish trend, while shifting from a green cloud to a red cloud indicates a bearish trend.
When the market price is above the cloud, it signals a bullish trend, and when it is below the cloud, it signals a bearish trend.
2.2 Generating Trading Signals
During an uptrend, a buy signal occurs when the token price crosses above the baseline while being above the cloud. Conversely, in a downtrend, a sell signal is triggered when the token price crosses below the baseline while being below the cloud.
Similarly, in an uptrend, a buy signal is generated when the conversion line crosses above the baseline while the price remains above the cloud. Conversely, during a downtrend, a sell signal is indicated when the conversion line crosses below the baseline while the price is below the cloud.
2.3 Forming Resistance and Support Levels
The Senkou Span A and Senkou Span B on both sides of the cloud form resistance and support levels in token price fluctuations, crucially providing traders with projected support/resistance areas for the next 26 days. The wider the cloud appears on the chart, the lower the likelihood of a trend reversal.
3. How to Use Ichimoku Cloud on MEXC
Currently, you can open and use Ichimoku Cloud on the web version, but it is not yet supported on the app version.
3.1 How to Open Ichimoku Cloud
Open the MEXC official website and log in. Choose [USDT-M Perpetual Futures] under [Futures] to access the futures trading page. (Note: The process is identical for Coin-M Perpetual Futures.)
On the futures trading page, click on the indicators button, check [ICHIMOKU Cloud], and click [Confirm] to open the Ichimoku Cloud data indicator.
3.2 How to Set Up Ichimoku Cloud
After opening the Ichimoku Cloud, you will see the relevant data included in the indicator above the K-line chart. These data show the information corresponding to the current position of your cursor, as well as the color of the corresponding line segment on the chart.
Click the [X] button to close the Ichimoku Cloud.
Click on the settings button to modify the basic parameter data of the Ichimoku Cloud. It also supports customizing the line style, including line color, thickness, and more, to better align with your personal preferences.
The Ichimoku Cloud provides us with an opportunity to gain insights into market trends. You can combine it with other indicators to develop your own trading strategy. As no indicator is foolproof, you can enhance your market analysis by using a combination of different indicators. Also, in futures trading, it is recommended to set SL orders when opening positions to avoid excessive losses due to strategy errors.
Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.