Best Binary Options Indicators Part Three
OK I am finally at the point where I want to talk about the popular IchiMoku indicator and how to interpret it to help your binary options trading. I have to say that in my opinion Ichimoku has to be among the best binary options indicators you can find. Now I want to explain that I am not just talking about accuracy or predicting the future etc etc... Because if you have read my earlier prelude to this point then you know that I don't think any indicator can predict the future. However there are a ton of traders who got really good with Ichimoku over the years and it is one indicator that has sustained the test of time and helped tons of traders interpret the markets with uncanny proficiency. So that is why I just have to say that Ichimoku is well worth your investment in time to learn and this tutorial will hopefully accelerate your learning to interpret Ichimoku efficiently.
OK now above is another chart with price stuck in a thick cloud and you can see that Ichimoku is painting a nice healthy up trending market. You know that conventional theory says that if you want to go short ( sell this currency pair ) then you need to see price break and close below that strong support at the bottom of this green Kumo Cloud. Ichi is saying looking forward it does not believe this is very probably and also the little accelerator indicator is already starting to agree and turn green. This at best can give you pause where others are trying to pull out their crystal balls and predict what is going to happen next.
ICHIMOKU and Binary Options
OK I am finally at the point where I want to talk about the popular IchiMoku indicator and how to interpret it to help your binary options trading. I have to say that in my opinion Ichimoku has to be among the best binary options indicators you can find. Now I want to explain that I am not just talking about accuracy or predicting the future etc etc... Because if you have read my earlier prelude to this point then you know that I don't think any indicator can predict the future. However there are a ton of traders who got really good with Ichimoku over the years and it is one indicator that has sustained the test of time and helped tons of traders interpret the markets with uncanny proficiency. So that is why I just have to say that Ichimoku is well worth your investment in time to learn and this tutorial will hopefully accelerate your learning to interpret Ichimoku efficiently.
Lets just get started by explaining the beauty of Ichimoku which is in my opinion the fact that it is an all in one indicator. There are so many things factored into this indicator and they are all right there on the very screen surrounding the price action of the markets. That means when you become efficient as it's name implies you can interpret market behavior with one look. Another fascinating thing about Ichimoku is that an effort has been made to look forward and to indeed make an attempt at a leading indicator. I have been basically prepping you the reader for Ichimoku all along with my prior tutorials and showing the similarities between all these indicators and now we are going to just be putting it all together and then we will look at some charts and share some simple trading plans to work around.
IchiMoku Components that we will be focusing on:
Tenkan-Sen: This is the Red line set at 9 periods on my chart you might remember from the earlier parts of this series where we talked about EMA's and how faster moving averages can cross over slower and signal a new up trend?
Kijun-Sen: This is the blue line on my charts and it is calculated based on 26 periods again notice how we talked about these very numbers earlier in this series. Stay with me however because these Ichi components are not calculated like the EMA lines there fore they bring some thing very different to the table in my opinion as they are laid out on the charts.
chinkou span: This is the black line on my charts and based on 52 periods of whatever the timeframe of the underlying Binary Options asset your chart is based on.
Kumo Up Clouds: On my charts these are the green clouds and you will notice they are plotted ahead of the actual most recent price and that is one COOL trait of Ichimoku and used properly some traders simply trade around the clouds alone as they get comfortable interpreting the clouds.
Kumo Down clouds: On my charts these are the Red Clouds and again you notice how they are plotted even ahead of the market itself.
CONFLUENCE Indicator:
Accelerator Oscillator: On these screen caps I will be using the accelerator Oscillator in the bottom window. There are 2 reasons I have this on these caps. Reason number one I was trading spot and new to regularly using Ichimoku but I liked it and wanted to add it to my toolbox. Reason number 2 is that along with price action and whatever indicator I like to see some confluence and at least know that somewhere out there in the world there are 2 little camps of indicator lovers who are looking at the same thing I am as I explained in earlier tutorials on this site confluence plays a big part in my life ( trading and other wise ). I waited for days and got a good example to show you dynamic traders coming into the markets and flipping even Ichi on it's ear but you can see how the other indicator gave me pause & I went short on one trade.
Accelerator Oscillator: On these screen caps I will be using the accelerator Oscillator in the bottom window. There are 2 reasons I have this on these caps. Reason number one I was trading spot and new to regularly using Ichimoku but I liked it and wanted to add it to my toolbox. Reason number 2 is that along with price action and whatever indicator I like to see some confluence and at least know that somewhere out there in the world there are 2 little camps of indicator lovers who are looking at the same thing I am as I explained in earlier tutorials on this site confluence plays a big part in my life ( trading and other wise ). I waited for days and got a good example to show you dynamic traders coming into the markets and flipping even Ichi on it's ear but you can see how the other indicator gave me pause & I went short on one trade.
OK lets cover the conventional Theory behind Ichimoku
1. When the Tenkan-Sen ( Red line fast moving ) is above the Kijun sen ( Blue line slower moving ) the market is trending up.
1.B. When the Tenkan-Sen ( Red line fast moving ) is below the Kijun sen ( Blue line slower moving ) the market is trending down. Does any of this sound familiar from what I shared in the preludes to this indicator? I think it is the names and different form of plotting that can throw some traders or turn them off before they give Ichimoku a fair shot.
1.B. When the Tenkan-Sen ( Red line fast moving ) is below the Kijun sen ( Blue line slower moving ) the market is trending down. Does any of this sound familiar from what I shared in the preludes to this indicator? I think it is the names and different form of plotting that can throw some traders or turn them off before they give Ichimoku a fair shot.
2. When price is trading above a Kumo Cloud then the market is trending up
2.B. When price is trading below a kumo cloud then the market is trending down. Again does this remind you of something. Central pivot or the 4/8 line on the Murrey Math Lines perhaps?
2.B. When price is trading below a kumo cloud then the market is trending down. Again does this remind you of something. Central pivot or the 4/8 line on the Murrey Math Lines perhaps?
3. Kumo Cloulds: There are traders who just like to trade around the Kumo clouds alone and here is the theory they work with. The fascinating thing about the Kumo clouds is that they are drawn ahead of the current prices on the markets. This means that by looking at your current Kumo cloulds and the future cloud that is being drawn ahead of where you are now it is possible in theory to spot that the trend is going Up or down in the future.
3.B. OK now here is something else that you will observe with Ichimoku the clouds on my charts are green and red but don't focus so much on that predicting if the markets are going up or down based on those colors. Instead as I just mentioned look for a direction on the Kumo clouds as a whole to give you some longer term trend clues. What I want you to note is that if the clouds color flips from one cloud to another the strongest support or resistance flips as well.
Example:
As the market moves forward and trades above a green Kumo cloud the strength of Support is right at the bottom. Conversely if the market has moved forward and is trading below a red Kumo cloud the strength of resistance is at the top of the cloud. So you see the clouds themselves are built in S/R lines.
As the market moves forward and trades above a green Kumo cloud the strength of Support is right at the bottom. Conversely if the market has moved forward and is trading below a red Kumo cloud the strength of resistance is at the top of the cloud. So you see the clouds themselves are built in S/R lines.
4. OK now in the previous installments on our road the Ichimoku we talked about Oscillators and how they are drawn and what they represent. Now, Look at the Kumo clouds in the charts that will follow this theory and do the clouds and their varying thickness remind you of anything? Now instead of using Ichi to predict the markets IMO it is better used to plan around because you will notice that the Kumo clouds can get to be very dense at times and this lets you know that if price stays above a very thick ( long oscillator ) Green cloud then you can interpret it to mean there is stronger support at that point and your trade is probably safer. Conversely when you see thin wisp of a clouds and your trade is already just above that cloud, well that might give you something to think about LOL.
Because of the way the clouds are drawn Ichimoku is attempting to be a leading indicator and painting a picture for you in advance but also you can use that picture not just as a prediction but as a very viable interpretation of reliable recurring patterns in the markets. This is why some people just swear by Ichimoku. When you follow the rules we just laid out consistently it can lead you to many high probability trades with a great deal factored in on one screen if you just interpret it properly. Also as you move the time frames up the signals just get stronger and more reliable in my opinion. Now lets close by looking at a few charts and let me point out some things I was thinking because there is simply just nothing better that sitting in front of a monitor watching the markets paint a picture for you on a chart and learning to appreciate the beauty of that art.
[CLICK] image to Zoom In/Out 
The chart above is a nice example of healthy DOWN TRENDING Ichimoku chart that might be looking to turn at this point. Now you can see we just popped through that thin section of the cloud like nothing. Remember when we talked about crossing pivot and all of a sudden traders using that indicator interpret a bear market and go along? Small retail traders are not the only ones with Ichimoku and in fact larger dynamic traders can see those easy targets to flip an Ichi chart on its axis and convince guys to stop buying and start selling.
So now you have one strategy and that is just to wait for those breakouts above or below a kumo cloud to close and maybe get in with a shorter term Binary options PUT or a CALL if we are just breaking out above the cloud. You also can assume that if the clouds are showing you a trend up and if the cloulds that are ahead are very thick oscillations then there is likely strong support if trading remains above those clouds that are ahead of us once price gets there.
However on this chart we are looking at you can see that we were trading below the cloud but our chinkou span ( that black line notice that V it made around these levels ) that lets us know that in the past price has been rejected around these levels. As you can see there is a TON of stuff you can spot when you know where to look just using Ichimoku. I did add the accelerator oscillator here and you can note how it has gotten above the zero line and is showing momentum to the upside. This is just for a bit of confluence to let us know if we got in on a PUT option or spot trade for example at the breakout below the kumo cloud then now might be a good time to close our trade. Again there is a lot to be seen with Ichimoku at just a glance and I am not using it to predict the markets here instead I am just using it to help me quickly visualize repeating patterns of price action.
[CLICK] image to Zoom In/Out 
OK now above is another chart with price stuck in a thick cloud and you can see that Ichimoku is painting a nice healthy up trending market. You know that conventional theory says that if you want to go short ( sell this currency pair ) then you need to see price break and close below that strong support at the bottom of this green Kumo Cloud. Ichi is saying looking forward it does not believe this is very probably and also the little accelerator indicator is already starting to agree and turn green. This at best can give you pause where others are trying to pull out their crystal balls and predict what is going to happen next.
[CLICK] image to Zoom In/Out 
OK next I have this chart above here with a dynamic trader just Punching above the Kumo clouds. Out of no where because you can see the clould pattern looked flat. This is where some people will say Ichi failed me and abandon this wonderful indicator if they bought there. The reality is that anyone can learn Ichimoku theory fast and easy and they can spot the times WELL IN ADVANCE where it would be possible to use the indicator to begin to attract hardcore Ichimoku traders into the markets as buyers believing they see a breakout from flat clouds to the upside. Remember when we talked about dynamic traders earlier in the tutorials on this site and discussed how their challenge is not choosing the direction of the market instead their challenge is getting traders to take the other side of their trades. Ichimoku is so fast and easy because there are S/R lines built in and on top of that the lines are not just flat instead there is a clue as to their likely strength also there is as momentum and trend looking forward. These factors make ichimoku a wonderful tool for dynamic traders as well.
Now again on the chart you can see a pattern where price was rejected at these levels in the past painted this time by an upside down V with the black line. You can also notice it in the price action as well. Looking closely at the accelerator oscillator you will notice that while it did go Green to the upside as a result of that Dynamic trader pushing the market way above the Kumo cloud in just 5 minutes. the indicator is just oscillating very softly above the zero line unlike what it looked like when this pattern showed up just a while before.
A word about Chickou span
OK now before I mislead anyone with the charts I have shared so far I notice that at times traders perceive support or resistance as a solid fixed force. That is not the case because the markets are alive and support as well as resistance will be broken at a point. In the examples above I am using the Chickou span as one of 3 indications at times to go contrarian but I want to look a bit closer and explain this a bit more.
There are times when you can look over the Chickou span and find areas that look like a V or an upside down V. This tells you at a glance that there was price action that wicked and turned around at that area BUT and this is very important in my view. There will be times when you are breaking out into a new area and the Chickou span at the very end will be just drawing up or down with the current market action. That means you have to adjust your train of thought because the market is breaking out into some levels much higher than usual and you can not even look over this 52 period Chickou span and clearly spot some price rejection with the V or upside down V formations on the Chickou span. Look at this chart here and you will see a market breaking out to the upside and leaving the Chickou span upside down V formation in the dust.
[CLICK] image to Zoom In/Out 
Now lets look at one last chart below where a market is just kind of trading flat in a range and you can see there is no real strong direction in the clouds, price action or even on the accelerator. So this is what I interpret as a flat no mans land that might be best range traded earlier on but at a point it will have to breakout of the range into one direction or another.
[CLICK] image to Zoom In/Out 
I hope this little Tutorial has helped a lot of readers understand that none of these indicators are quite as challenging or complex as some marketers would have you believe. I also hope I have convinced a lot of traders to find a place in their toolbox that they take with them to work on the markets for the wonderful Ichimoku indicator. Ichimoku is one of the oldest indicators still around and thriving to this very day and it is an amazingly fast indicator to use to glean a lot of information from a chart in a short time. Remember even when dynamic traders interfere with Ichimoku because it is so fast to read and so Objective to interpret, often you can stay out of trouble or simply join the dynamic institutional traders for the ride. That is all I have for now my fellow trader so as always in closing I make the following statement to you " if Alfred is Talking Markets you can take it to the bank ."