Lessons on Ishimoku: summary rules and answers to questions

 

In issue 20 of ForTrader.org, we conclude our series on Ishimoku indicator. Unfortunately, the format of the magazine does not allow to reveal all the secrets of this indicator in 100%. However, I did my best to explain to you the essence of working with the Ishimoku indicator and to show its remarkable and unique abilities to bring success to work on the electronic exchanges of the world.

In this article we will summarize the lessons and define the general basic rules of working with the Ishimoku Indicator. Memorize them and follow them rigorously. Success will not keep you waiting!

Rules for working with the Ishimoku indicator

— When setting up an indicator, clearly set yourself a task, what you want to see on the charts of the tool. On this basis, set the parameters of the indicator. The parameters should reflect the picture of the TF on which you are working, and therefore set according to the number of candles in the TF of interest to you range. Too small and too large parameters distort the market picture. Small ones give a lot of noise and false signals, while large ones, on the contrary, will make you wait a very long time for a signal, and it will not always be true.

— When analyzing the market always Use multiple time charts. The analysis is conducted from the larger to the smaller TF, the goals are set from the smaller to the larger.

— Entering the market carry out always in the presence of a strong signal, confirmed by at least two more TFs.

— Never do not enter the marketwithout a clear and confirmed signal.

- If there is a signal always Use other elements of technical analysis (channels, waves) to set goals for this signal.

— Never do not try to catch all the movement of the instrument.

- Targets by signal always set with the noise of the market and reduce level TakeProfit at 15-20%.

- Actively use candlestick analysis when working with the Ishimoku indicator. When you receive a Signal from the indicator, wait for confirmation from the candles.

Here are the basic rules that I have deduced for myself and I advise you to stick to them. I'm deliberately not saying anything about the size of the work lot and MoneyManagement. Each trader is obliged to observe these positions strictly. 

Questions and answers on the master class

During the release of the lessons on the Ishimoku indicator I received a lot of questions concerning the clarification of some points on working with the indicator, as well as on the text of the lessons themselves. I am happy to answer them from the pages of the magazine.

QUESTION 1:

Reading Lesson #1: "SSA is the upper boundary of the cloud...SSB...the lower boundary" - should we clarify that this is true for a bullish cloud, and vice versa for a bearish cloud?

ANSWER:

 You are absolutely right. Such a clarification must have taken place.

QUESTION 2:

"On the moments of TS reversal strategies are built to enter the market. Of course, as many traders as there are TSs and strategies... but maybe also on the exit? Especially (in my opinion) for very short-term trades (I could be wrong, because I don't intend to).

ANSWER:

 Of course. If we mean entering the market by the Tenkan Sen signal, it also implies exiting the market by the reversal signal, if we have a position in the market in the direction of the pre-turn signal. In principle, this is not such a significant difference. Entering the market by the TS signal in the direction of a new trend, we understand that the cancellation of the previous trend takes place, and thus the exit from it. 

QUESTION 3:

Perhaps it is worth paying attention to the value of signals that appear on the FORMING candle and on the FORMED (closed), many beginners lose their heads after seeing an indicator jump, which eventually "evaporates".

ANSWER:

Do you mean the moment of market entry? I think I have repeatedly emphasized this point, that the confirmation of a breakthrough, i.e. fixation of the price behind the level is, as a rule, the CLOSE of the second candle behind this level. Accordingly, at the opening of the third candle we have a confirmation of the signal and the point of entry into the market.

QUESTION 4:

Reading Lesson #1: "In the case of finding the price between TS and KS, they can act as targets in a flat movement. I understood it this way: Flat was marked by something, for example on a higher TF, or here, but parallel lines of the indicator, and at the same time the price was between the TS and KS levels, therefore, we work from TS to KS and vice versa. But we can understand: if the price is between these lines, then we have a flat.

ANSWER:

All your reasoning is correct. If we have a flat, which is usually the price inside the cloud on higher TFs, then when the price is between TS and KS on lower TFs, we work on these targets. As a rule, in such situations, the lines will run parallel to each other in the horizontal direction. 

QUESTION 5:

Here: "It is also done when marking a market reversal.

Frankly speaking, here I was puzzled, now I understand it this way: the turn is marked by something (TS reversal, the counter movement of the cloud lines...), and at the same time the price is between the TS and KS lines. In this case, we work in the direction of the indicated turn before the line, but in contrast to the flat, only in one side - the side of the reversal?

ANSWER:

In a reversal, the price does not necessarily have to be between TS and KS. In that paragraph, we are not talking about the special case of price finding between these lines, but about the fact that these lines are targets and resistance levels and support lines. When moving towards these lines, they act as takeprofit targets. 

QUESTION 6:

"...the KS line itself reflects the price equilibrium...". TS and KS are 50% pullbacks on different time frames, but it is the Kijun that reflects the equilibrium? On all TFs with the parameters given in lesson 4? Is this from personal experience?

ANSWER:

Yes, for all TFs. Since the indicator has different settings for each TF, it reflects the situation in relation to its TF. The price cannot be balanced in the trend of the week and intraday on the same level. Hence the working strategies - long-term, medium-term and intraday. 

QUESTION 7:

"...if the price pulls back under the Kijun Sen line after a bullish crossing...". Does this mean a bullish crossover by the price of KS and a quick (relative to the selected TF, of course) return under it, or any bullish crossover, the same "golden cross"?

ANSWER:

Meaning the first: the price crossed upwards KS and then rolled back under it. 

QUESTION 8:

In lesson 4 we read: "...we got a signal from the Tenkan Seng (position 1 - red) about the end of the correction and to exit the buying. On the next candlestick the price broke through the Senkou Span B and consolidated inside a bearish cloud (position 2 - blue). The crux of the matter: the slope of the Tenkan, which is marked by a red one, could NOT have warned us about the end of buying, because it was only at the next bar that it was formed synchronously with the SSB breakthrough, therefore we could have closed with a trailing stop under the KS (as you recommend to do further in this lesson). Am I right or am I wrong somewhere?

ANSWER:

Tenkan reversal will occur when the first black candle closes and the next one opens, so the lesson is correct. Before that Tenkan and Kijun move for a long time to meet each other. This is already a sign of a possible trend change. The second candle with a breakout of the SSB gives confirmation of the change in the trend.

Next. A stop for buying in this case would be better to put it under the upper limit of the cloud. I also wrote about it. 

QUESTION 9:

In lesson 4 we read: "Then follows a confirmation of sales in the form of a "dead cross...". Let me fantasize a little here, and if the sideways movement continued, this target would have to be moved with each new candle along the lower boundary of the cloud along the Tenkan, in our case upwards (as I have shown in the figure)?

ANSWER:

Yes, you are right, but don't fantasize about it.

While the price is in the cloud and the Tenkan is below the Kijun, we work inside the cloud with the targets on the lower boundaries of the cloud. And move the target according to the movement of the cloud line. If it happened, then the Tenkan and the Kijun would merge back to one line or move parallel to each other horizontally. There was already a trend there, by the way. Then a "Golden cross" would have followed (probably), i.e. a buy signal, which means that instead of continuing the down-trend we would get a correction to the correction, and it would be a signal to be ready to work in a bullish trend.

However, there was a breakdown of the cloud down, and we calmly measured our target. 

At this point I will take my leave. Thank you all very much for your attention to my work.

Other articles of the master class "Lessons on Ishimoku"

• Lessons on Ishimoku: the indicator, its components and basic signals
• Trading with Ishimoku: the cloud, its purpose and trading signals
• Trading with Indicator Ishimoku: Chinkou Span and its signals
• Lessons on Ishimoku: market entry and stop orders
  
• Lessons on Ishimoku: interaction with candlestick analysis
• Lessons on Ishimoku: Interaction with Channels and Elliott Waves