What is the Ichimoku Swing Trading System?


In this strategy article, we will cover the Ichimoku Swing Trading System. The Ichimoku Cloud system which was developed by the Japanese in 1930 it may be not so commonly used in the USA but in Japan this is the system that they’re primarily used to trade with. The Ichimoku system when you look at it on a chart it does look complicated, but if you know what you’re looking for it’s not that difficult to understand it. The Ichimoku system is designed to keep traders on the right side of the dominant trend and to hold onto this trend for as long as possible until it’s clear that it has changed direction.

That’s the reason why the Ichimoku system suits best for swing trading, as it maximizes the profits while minimizing the risk involved in trading. Going forward, we’re going to look at one of the most popular Ichimoku swing trading systems designed to help you capture most of the big swing in the markets.

How to trade Using the Ichimoku Cloud


Since the Ichimoku Cloud system consists of five components our strategy doesn’t require the use of the Chikou Span or the Lagging Span, which lags behind the price, so you chart should look the same as in the figure below.

Ichimoku
Ichimoku Swing Trading System

Ichimoku Swing Trading System Gets You Into Position Early


This swing trading strategy that you’re about to learn is a good way of getting in fairly early in the trend and ideally taking as much profit as possible for the relatively strong moves using the Cloud as a backstop when we have the really strong but slowly moving trends.

The cloud is designed to represent support and resistance and is supposed to represent several layers deep because support and resistance are not a single line drawn in the sand, but comprise of other several layers deep and that’s what the cloud is designed to do.

This swing strategy requires us to use the default settings of the Ichimoku Cloud system, applied to the daily chart. Since the rules are quite simple, we’re going to use two examples for both long and short in order to better understand the mechanics behind this strategy.

Ichimoku Swing Trading System – Buy Signal


In order for a long entry to be triggered we need price to break from the underneath, above both the Base Line and Conversion Line. A daily close above both of the two averages is required followed by a crossover of the Conversion Line above the Base Line. Once these two conditions are satisfied a long entry is submitted at the opening of the next day with a stop loss below the breakout candle.

Ichimoku
Ichimoku Swing Trading System – Buy Signal

Using as our stop loss level the low of the breakout candle we significantly reduce the risk and more than just that we are trading with the market order flow. Since this is a swing trading strategy we’re looking to capture as much as possible from this presumably new trend and we’ll be looking to trail our stop loss level below the Cloud or exit the position once a new crossover happens in the opposite direction.

Ichimoku Swing Trading System – Sell Signal


In order for a short entry to be triggered we need price to break from the above, crossing below both the Base Line and Conversion Line. A daily close below both of the two averages is required followed by a crossover of the Conversion Line above the Base Line. Once these two conditions are satisfied a short entry is submitted at the opening of the next day with a stop loss below the breakout candle.

Ichimoku
Ichimoku Swing Trading System – Sell Signal

Both the stop loss and take profit levels should be used the same as it was in the case where we are going long. I hope that by now you’re convinced that the Ichimoku Cloud system is a good way of identifying the trends and it can be simple and profitable traded system on all currency pairs on the daily time frame and it can easily capture 80% of the trend.


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