Gunbot Ichimoku Strategy Ichimoku Cloud Basics — CryptoDROI
Gunbot Ichimoku Strategy Settings Ultimate Guide
Understand the Gunbot Ichimoku Strategy Settings by Learning How all the components of the Ichimoku Cloud Work and Discover How to Read this Indicator in the Trading Chart.
The Ichimoku Cloud is the technical indicator you need to know if you want to make smarter trading decisions. It can identify support and resistance levels, momentum, and trend direction by taking multiple averages. The Ichimoku Cloud also plots these figures on a chart, which gives you a “cloud” that analyzes your future trading predictions.
Ichimoku means “a glance” in Japanese. It is also called Ichimoku Kinko Hyo, which in Japanese means “balance at a glance.” Designed to identify support and resistance areas, trade direction, and entry and exit points.
With the Ichimoku chart, traders can identify higher probability trades even at a glance. It consists of 5 lines that form a “cloud.”
Ichimoku allows traders to understand the current state of the Crypto market. This analysis is also a trendy indicator of support and resistance points; this is the greatest strength of the Ichimoku study because it will allow you to quickly determine the subsequent market changes. Then, it will enable you to choose the following market changes rapidly.
Although it looks very complex in the charts, it is easy to understand. Still, it would be best to spend some time mastering it because it can help you predict future cryptocurrency prices, thus offering you a long-term perspective on the crypto market.
In this crypto trading article, I will be giving you a comprehensive guide on what Ichimoku cloud is, so you can apply this knowledge to your Gunbot Ichimoku Strategy once you set it in your trading bot.
Let’s start with the obvious question. What is the Ichimoku cloud?
Ichimoku Cloud Explained
Ichimoku is a graphics system developed by Goichi Hosoda before WWII, but it was not released to the public until 1968 after 20 years of backtesting with 10,000 students. It is one of the most widely used indicators in all financial markets today.
His big idea was to calculate the moving midpoints of equilibrium and use those calculations to project a future cloud that provides support and resistance levels. He added a confirmation line calculation as an extra, which could help by showing you the physiological probability of a trend continuation.
As said earlier, Ichimoku Kinko Hyo translates to “Balance Chart at a Glance,” which is a perfectly adequate description of how the indicator works. The Ichimoku Cloud is not so much an indicator as it is a collection of technical indicators.
It shows you a highly detailed picture of price sentiment, trend strength, support, and resistance. A holistic view allows the experienced trader to tell quickly whether a potential trade has a high or low probability of profits.
The Ichimoku Cloud is a charting technique that gives you an idea of where the price may go in the future. The cloud is a kind of “average” that helps determine where the price will go.
Ichimoku, which can look very complicated or overwhelming to new traders, quickly becomes comprehensible once you understand the various lines and what they mean.
How does Ichimoku Works?
If you look at the past and present trendlines, you can predict the future. Markets follow this logic because when something is trending, it’s so until it runs out of steam. It goes up until it doesn’t.
The gist of the matter is that things stay in motion, so you can use past and present trendlines to predict the future.
The Ichimoku is a highly effective system, reflected in the inherent simplicity of the signals it generates. Ichimoku cloud system is made up of five components, all of which I will explain below.
These five components combine to create a strategy that generates a variety of trends and signals.
Conversion Line — Tenkan-Sen
The Tenkan-Sen is the fastest of the three lines in the Ichimoku Cloud indicator and is used to track trades and identify trends. Watch the line closely because it follows the price, so if it is climbing, the price is likely to go up. If it is falling, expect the price to go down.
The conversion line is an essential indicator in the crypto markets. This line is calculated by adding the highest high and the highest low over the past nine periods. The result of this formula is a key support line, which can signal when buyers are oversold or when sellers are overbought.
Tenkan sen is a turn line calculated by the average value of the previous nine periods. The median value is the average between the highest and lowest points of the last nine periods.
The midrange average value is not a moving average. There is a big difference between the two. The significant contrast here is uniformity. The midrange average value does not appear uniform like a moving average.
Hosoda believed that using extreme prices over time is a better measure of equilibrium than closing prices alone. Nevertheless, the Tenkan-Sen, or “price pulse,” is not typically used on its own but rather in tandem with the other elements of the Ichimoku Cloud.
Baseline — Kijun-Sen
The baseline is known as Kijun-sen. The baseline is calculated by taking the high and low points of the last 26 periods, then dividing them by two. Due to its extended period, Kijun Sen is a more reliable indicator of short-term price sentiment, market sentiment, and balance.
It’s an essential tool because it can confirm a trend change, act as a trailing stop-loss point, and you can use to set support and resistance levels.
When the Tenkan-sen and the Kijun-sen (9-period and 26-period conversion lines, respectively) cross, this is a trade signal.
When the price is higher than the Kijun Line, the short- to medium-term trend is up. When the price is lower than the Kijun Line, the short- to medium-term trend is down.
If the Tenkan-sen and Kijun-sen are tangled up or crossing back and forth, it means that the price movement lacks an overall direction or is erratic, so it’s hard to tell whether the price is going up or down. Therefore you can’t rely on crossover signals in these market situations.
Leading Span A (Senkou Span A)
Senkou span is the main stage or the main stage A. You can calculate it by considering the average of the turn line value and the baseline mentioned above (Tenkan-Sen and Kijun-Sen).
It is calculated as (Tenkan Line + Kijun Line)/2 traces 26 periods ahead. Senkou Span A and Senkou Span B form the Ichimoku cloud. The time lag is a unique feature of Ichimoku and indicates where resistance and support may be in the future.
The two lines that makeup Senkou (Leading) Span A and Senkou (Leading) Span B form a cloud. The section between the two lines is colored or shaded. These lines can act as either support or resistance for the price.
When the price is above the lines, it acts as support, and when the price is below the lines, it acts as resistance. Leading (Senkou) Span A uses historical data to predict where you will expect support or resistance in the future.
If the Senkou (Leading) Span A line is at the top of the cloud, it is a bullish signal since the shorter-term price has crossed above the longer-term price point.
While it may look similar to the SMA, the Senko Span A formula is very different from the Simple Moving Average. Its calculations are divided by two to create a mid-point, not an “average” like the SMA.
Leading Span (Senkou Span B)
Senkou span B is the leader of the cloud range B. You should consider the average value of the previous 52 days and plot this value as the value of the next 26 days.
It is calculated as (higher lower + lower)/2 over the last 52 periods and plotted 26 periods ahead. This line with Senkou Span B forms the Ichimoku cloud and represents long-term equilibrium.
If the Senkou (Leading) Span B line is at the top of the cloud, it is a bearish signal since the shorter-term price has crossed below the longer-term price point.
When the Senkou Span A crosses the Senkou Span B, it may indicate a trend change. For example, when the Leading Span A crosses above the Leading Span B, it may signal that an uptrend is coming. If Span A crosses below Span B, it may signal that a downtrend is coming or there is a price correction.
Lagging Span — (Chinkou Span)
Chinkou Span is the delay line, the closing value of the coin from 26 days ago. It shows how the current price action compared to the price action 26 periods ago.
The underlying belief here is that if the current closing price is lower than the closing price 26 periods ago, there is the possibility of a further downward price movement and vice versa.
Using the Chikou Span, one of the most important things to look for is whether the current price is above or below it. If the current price is above the Chikou Span, this indicates a weakness in the price. If the price is under the Chikou Span, this is usually an indication that the price moves upward and has strength.
Also, Chikou Span does not take into account the average value. It is instead 26 periods to the left of the most recent price.
The Cloud (Kumo)
The cloud is an essential component of the Ichimoku chart. It is the portion between Span A and Span B. When the price hits this Kumo, you can find trading opportunities. It is the essential trigger in Ichimoku analysis to enter or exit a trade.
Kumo is between Senkou Span A and Senkou Span B and is a vital part of the Ichimoku Kinko Hyo. It represents critical support and resistance levels, but the Kumo shows a multidimensional picture compared to traditional support and resistance lines.
The thickness of the Kumo indicates the strength of the support or resistance; the thicker the cloud, the stronger the support/resistance. Additionally, given how the Kumo is drawn forward, it predicts support and resistance levels; this is incredibly powerful, as most indicators lag and react to price.
For example, if the price quickly crossed a thick Kumo, it would indicate that the movement was powerful. The area in the center of the cloud is called the equilibrium area, and the price in this area is unpredictable, and the experienced Ichimoku trader will not place trades in these areas.
What is unique about the Cloud (Kumo)?
The Kumo has its built-in sentiment that you can use in conjunction with the price sentiment. Note in the table above that the Kumo changes color after being pinched.
When Senkou Span A is above Senkou Span B, the Kumo is said to be bullish. On the other hand, the Kumo is bearish when Senkou Span B is above Senkou Span A.
Again, because the Kumo is forecast in the future, it can give you an early warning of a change in price sentiment. Try to get this from a few moving averages!
The Kumo can also have flat tops and bottoms, and these are important structures. They exert an almost gravitational pull on prices. You will notice that when the cost comes out of the Kumo, and there is a flat top or bottom, that price often comes back to the Flat Kumo.
With experience, you will get to know them and make sure you do not enter a false trade if broken by ensuring that the price has been released from the gravitational pull of the Kumo.
Ichimoku Settings
As the cryptocurrency market never closes, this particular setting (10, 30, 60, 30) double it (20, 60, 120, 30) has proven to be the best.
Doubling your Ichimoku cloud settings prevents a lot of inaccuracy in our trading strategy. The cloud is designed to capture a more significant portion of price movements (i.e., 80/20 rule). The original setup was based on convectional markets, which did not operate on weekends or at night.
However, people still get a result from this, as lowering your Ichimoku setting can be helpful as they detect trend reversals quicker. With this, you get (9, 26, and 52).
Analyzing the Chart
Having done all these explanations, how do you apply Ichimoku Kinko Hyo into your trading? Below is a whole discussion about this and demonstrations that constitute trading signals of different strengths.
Ichimoku Trading Signals
Momentum Signals: Tenkan-Sen Cross Kijun-Sen
The cross is basically when the conversion line, Tenkan Sen, crosses paths with the baseline Kijun Sen. If the conversion line crosses above the baseline. It is a bullish signal, and if it passes below the baseline, it is a bearish signal.
Fortunately, the Ichimoku gives us more information to help us refine these signals. If a bullish cross occurs above the cloud (Kumo), this is a strong bullish signal.
If the bullish cross occurs below the cloud (Kumo), this is a weak bullish signal. Finally, if the bullish cross occurs within the Kumo, then a neutral bullish signal is seen. The reverse is true for bearish crosses. A solid bearish cross would be the conversion line under the baseline under the cloud (Kumo) and so on.
Trend-following Signals
Here, the trend gets detected by the color of the cloud. When the paint is green, the trend is positive. When the movement is red, the trend is negative.
In other words, a bullish market happens when the color changes from red to green, and a bearish occurs when the color changes from green to red.
Support and Resistance
When determining your support and resistance levels, all you need to do is look at the candle. If today’s candle is right above the cloud, you can bet the price trend is up. The first level of cloud support will be at the top, and the second level will be at the bottom.
If you wait until the end of the day, you will be able to see the closing price under the cloud. You can then reverse the trend determination.
It’s a different story with candles under the cloud. There is a lot of market information that you could get with the Ichimoku strategy, even if you are focusing on cloud functions.
Signal Strength
The general rule of thumb is that if the Lagging (Chikou) Span is above the price action when a bullish cross occurs, it adds more strength to the strength of the signal.
The reverse is true for bearish signals; the Lagging (Chikou) Span below the price action adds more strength to the positive outcome of a short trade.
Therefore, a compelling trading strategy is to wait for a bullish or bearish Tenkan/Kijun cross with confirmation from Chikou Span. This requires patience, but it is a very reliable signal.
Cloud (Kumo) Breakout
This signal is where the price moves away from the Kumo, either above or below. A long trade is indicated when the price exceeds the Kumo, and short trade will be shown when the price crosses below the Kumo.
You can also use the Chinkou Span as in the Tenkan/Kijun cross described above.
It would be best to use the built-in Kumo sentiment to confirm a long or short trade. Finally, by paying attention to the dangers of Flat Top or Flat Bottom Kumos, the signal strength may be further increased or dismissed as too risky.
Using the Ichimoku Strategy
Using the Ichimoku strategy, you can earn a lot just by watching the Kumo or the cloud.
Either way, you can interpret the Ichimoku chart data by component or as a whole, and you will have a clear idea of what the crypto market is like at any given time.
Focusing on the cloud is the chart training done by Senkou span A and Senkou span B. When you analyze the shadow relative to its thickness, you will find some market characteristics.
When cloud thickness is the foundation of your Ichimoku strategy, you aim for prices that will or will not support a substance breakout. For a thicker cloud, this means the cost is less likely to be managed with a sustained lead.
When the cloud is thinner, the cloud breakthrough will have more chance. It doesn’t matter which stretch is at the top. It can be span A or span B, but the benchmark for you will be the thickness.
Ichimoku Advantages and Disadvantages
Ichimoku cloud Pros
- Flexibility: As discussed above, Ichimoku can be used with many trading indicators like Moving average, MACD, Support, and resistance. Intensive approaches to this will strengthen the accuracy of your trade.
- Automation: In addition to its flexibility, Ichimoku can be automated with Gunbot. And it is no rocket science, so easy to use, plus it comes included in the Standard, Pro, and the Ultimate bot Licenses.
- Versatility: As stated earlier, Ichimoku is versatile in price direction, trend lines, support and resistance levels, and a comprehensive approach to price action.
Ichimoku cloud Cons
At this point, you should have a good understanding of the Ichimoku cloud, so it’s time to set up your Gunbot Ichimoku strategy. Read on!
Gunbot Ichimoku Strategy
You can trade with Gunbot by using it to signal when a candle crosses one of the three lines that make up the Ichimoku indicator. Set it up to execute BUY and SELL orders when these candles cross, depending on which line you want to use.
All you have to do is specify in your Gunbot Ichimoku strategy settings which line (Tenkan-Sen, Kijun-Sen, or Kumo) you want the bot to use.
The buy orders are posted when the current candle moves entirely under Kumo, Tenkan-Sen, or Kijun-Sen. This setting depends on your choice of which line you want the bot to use for buying orders.
The sell orders are posted when the current candle moves entirely over Kumo, Tenkan-Sen, or Kijun-Sen. This setting depends on your choice of which line you want the bot to use for selling orders.
The Gunbot Ichimoku strategy settings apply to all pairs running this strategy. If you want a different set for one or more coins, do so by editing the specific pair override in the GUI or your config.js file.
I recommend using Ichimoku for both (buy and sell methods) to keep it simple, but you can mix it and use any other strategy or confirming indicator if you like.
Gunbot Ichimoku Strategy Settings
Your first step is creating a new strategy (give it a name) using the pre-set BUY_METHOD and SELL_METHOD named Ichimoku. You can do this in the GUI or your Gunbot config.js file.
Gunbot Ichimoku BUY and SELL Settings
The main parameters here are “BUY_ENABLED”/”SELL_ENABLED”: true, and “BUY_METHOD”/”SELL_METHOD”: ichimoku. Other values like Take-Buy, Take-Profit or similar are your choice.
“ DOUBLE_CHECK_GAIN “: true, is also highly recommended.
Gunbot Ichimoku Strategy Indicator Settings
These are the most important settings that will affect your Gunbot Ichimoku strategy performance.
“ TENKAN_PERIOD”: 9, this is the default number of candlestick periods used to calculate Tenkan-sen. This parameter is named conversion line in Tradingview.
“ KIJUN_PERIOD “: 26, this is the default number of candlestick periods used to calculate Kijun-sen. This parameter is named baseline in Tradingview.
“ SENKOUSPAN_PERIOD “: 52, this is the default number of candlestick periods used to calculate Senkou span. This parameter is named Lead in Tradingview.
“ DISPLACEMENT “: 26, this is the default number of candlestick periods used for displacing Kumo and Chikou-span.
“ ICHIMOKU_PROTECTION “: true, set this to true to prevent the bot from closing your position if the current candle touches Kumo in the opposite direction of your trade.
“ KUMO_SENTIMENTS “: true, if you set this to false, it will ignore Kumo when you’re trading with the Gunbot Ichimoku strategy.
After that, you can choose Kumo, Tenkan, or Kijun to buy and sell, make sure you use only one, do not activate multiple BUY or SELL triggers.
Also, remember the argument between the traditional Ichimoku cloud settings (9, 26, 52, 26) and the settings for crypto 24/7 open markets (20, 60, 120, 30) when you set your numbers.
So, the answer to the question. Should you use different settings for Ichimoku Cloud on cryptocurrency markets, it is totally up to you.
Lastly, don’t forget to read about the other Gunbot strategy settings if you need help with the other global parameters while using the Gunbot Ichimoku strategy.
Conclusion
The importance of Ichimoku technical analysis in trading cannot be overstated. The multiple data points represented by the five lines give the trader a more complete and in-depth view of the particular price action.
However, the real value of Ichimoku lies in its highly graphical visual display, which helps the trader to immediately discern and filter out low probability trades from those with the highest probability of success at a glance.
Ichimoku is an exciting way of learning and creating buy/sell signals of any coin of your interest. This article has given you a lot of insightful information about this trading strategy.
To be on the safe side, I would like to give you one last explanation of the Ichimoku cloud, this time in a screenshot provided by GuntharDeNiro on one of his famous “ Gunbot the Way I run it “ articles.
Here’s Gunthar’s Ichimoku Explanation:
A pretty simple yet concise way to explain the Ichimoku cloud. 🙂
I hope this article helps you broaden your crypto trading skills, but don’t use it as trading advice, keep learning and never trade with money you cannot afford to lose!
Automate your crypto trading now and profit with the Gunbot Ichimoku strategy today.
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Originally published at https://cryptodroi.com on September 6, 2021.
