My Secret Weapon: The Best Technical Indicator in the World Presented by Andrew Keene Past performance is not indicative of future results.
Andrew Keene - From 2006-2010 I Turned $50,000 into millions Have Turned 1000’s of Students to Full Time Traders Active Trader in Futures, FX, Stocks & Commodities Regular Contributor to CNBC & Bloomberg, Fox Business, CBOE and more
RISK DISCLAIMER Day trading, short term trading, options trading, and futures trading are extremely risky undertakings. They generally are not appropriate for someone with limited capital, little or no trading experience, and/ or a low tolerance for risk. Never execute a trade unless you can afford to and are prepared to lose your entire investment. All trading operations involve serious risks, and you can lose your entire investment.
How I found the Cloud In 2006 I blew out my account while trading on the floor in Chicago. After, I took a trip to Asia to clear my head and regroup before going back to the floor. While travelling I met traders living in Asia and we began to talk about how we trade and our favorite strategies. These people introduced me to what was their, and is now my, favorite technical indicator. The Ichimoku Cloud. Upon returning I spent the next few years deepening my understanding of the Cloud and how to best apply it to my trading plan as an options trader. I have read every piece of literature on the cloud and have learned from practical experience which setups are the best and how to most efficiently apply the cloud to any trading plan.
WE have New and Exciting New Trading Ideas and Set-ups for the Ichimoku Cloud
The 6 Components of the Ichimoku Cloud Tenkan-Sen Line Kinjun-Sen Line Senkou Span A Line Senkou Span B Line Kumo Chinkou Span Line
Components of the Cloud The Tenkan-sen Line: Short Term Trend: Similar to 10 Period MA = (highest high + lowest low)/2 over the last 9 periods tenken-sen line
Components of the Cloud The Kinjun-sen Line: Longer Term Trend: Similar to 30 DMA = (highest high + lowest low)/2 over the past 26 periods Kinjun-sen line
Components of the Cloud Senkou Span A: Future Short Term Trend = (tenkan-sen + kinjun-sen)/2 plotted 26 bars in the future Senkou Span A
Components of the Cloud Senkou Span B: Future Long Term Trend: Fib 50% Retracement = (highest high + lowest low)/2 over the past 52 bars plotted 26 bars in the future Senkou Span B
Components of the Cloud Kumo “the cloud”: How Hard or Easy it is to Break the Trend Kumo
Components of the Cloud Chinkou Span Line: How does the Today’s Price compare to last Month = current bar’s closing price plotted 26 bars back Chinkou Span Line
STOP LOSING MONEY TRADING NOW! If I can make money trading like this, so can YOU! I’m just like everyone here, no special indicator, algo, no Harvard Business school It is simple, easy from Beginner to expert
Applications for the Cloud TIME FRAME: The cloud will work best on different time scales depending on the security. Faster time scales will produce more traps in some assets while providing good signals in others. How fast is too fast? Stocks- Best Signals Work on the Daily Chart. Currencies and Currency Futures- Best Signals come on the 4 Hour Bar. Crude Oil, Gold, and Silver Futures- Best Signals Trade on the 5 Minute Bar. Dow, S&P, and Nasdaq Futures- Best Signals Trade on the 12 Minute Bar. Day Trading AAPL, FB, TSLA, and TWTR: Best Signals come on the 5 Minute Bar.
Trading With the Cloud THE BEST SIGNAL IN THE WORLD: There are many setups and strategies that a trader can use on the cloud. We want to talk first about the hands down best setup the cloud can produce. THE BEST SIGNAL IN THE WORLD: Price will be breaks the cloud to upside or downside. 2. The lagging indicator (chinkou span) breaks cloud in same direction. The price trading above/below 9 and 26 period moving averages. 4. The future cloud is sloping direction of trend. The same conditions will be present in the best short setups as well but the price, lagging indicator, and moving averages will be breaking the cloud to the downside.
Looking at Past to Predict Future Although the cloud is forward looking the cloud is not a magic 8 ball. Past doesn’t predict the future. What has worked in the past, will work again in the future.. Four Other Set-ups with STOPS: Break of the Cloud: STOP: Other Side of the Cloud Buy/Sell the 9 Period Moving Average with Stop at 26 Period MA Buy/Sell the 26 Period Moving Average with Stop in the Cloud Buy the Re-Breakout of the Cloud as Trend will Resume
Calculating Targets: Target #1: 50% of the Stop I always Set-up 4 Targets: Four Targets: Target #1: 50% of the Stop Target #2: 100% of the Stop Target #3: 150% of the Stop Target #4: 200% of the Stop
MCD Daily chart SIDEWAYS: NO GOOD SIGNALS
Get Short: Short Stock Buy Puts Sell Call Spreads Stock breaks the cloud to the downside here signaling a short. We always have FB, TWTR and TSLA on the 5 min bar on the open. They are the stocks that produce the most consistent set ups
A trader would short the downside break of the cloud and would put a stop above the high of the day. Again, this trade runs all day. Stock breaks the cloud to the upside initially then puts two large wicks on top of the candles as the broader market begins selling off as well. There will be opportunities to re enter trades like we see here. A trader needs to keep their eyes on the charts.
Trading With the Cloud Using multiple time frames for confirmation: Traders can filter out more traps by looking at multiple time frames. If a shorter period chart is setting up for a trade a trader can check a longer period to see if the set up is justified. Let’s re-examine the FB short from earlier. This time we will look at another time frame for confirmation of the setup on the 5 min chart. We will look at the 15 min chart as well.
5 min Chart Setup As we can see here if a traders shorted the downsie break of the cloud and put a stop in above the days high they would have stayed short ALL DAY. Stock breaks the cloud to the downside here signaling a short. We always have FB, TWTR and TSLA on the 5 min bar on the open. They are the stocks that produce the most consistent set ups
We see the setup forming on the 5 min chart so we then look at the 15 We see the setup forming on the 5 min chart so we then look at the 15. Here we see that the stock is trading below the cloud along with both the 9 and 26 period moving averages. The future cloud was also downward sloping. That’s all the confirmation we needed to pull the trigger.
Trading With the Cloud Using multiple time frames for confirmation: This practice can help less aggressive traders find the best quality setups. This can be done with any time frame. On the 5min- Look for confirmation on the 15min On the 15min- Look for confirmation on the 1hr On the 1hr- Look for confirmation on the 4hr On the 4hr- Look for confirmation on the Daily On the Daily- Look for confirmation on the Weekly
Summary The could is our favorite technical indicator and it can be applied to any product on any time frame making it one of the most universal indicators around. Remember to look for the best setups and the 4 criteria that make it the best. Past does not predict future. Be aware of whether or not the product you are trading lends itself to trading the cloud. Some things simply don’t trend well. Remember to look at the candles. If you see something contrary to the cloud then it is ok to pass on the trade. Don’t try and fight the trend. It is too difficult to make money consistently trading this way. Trend is your friend. Use multiple time frames to confirm set ups on faster charts. This will help filter out traps and guide you into the highest probability set ups.
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