I am a strong believer in the idea that trading should be simple. The strategy I am going to talk about is very easy to implement. It is also one of my favorite Ichimoku strategies. It is the Senkou Span (Leading Span) B strategy.
Ichimoku Cloud consists of two lines which are Senkou Span A & Senkou Span B. Senoku Span B positions itself on top during a bearish trend, and at down during a bullish trend.
These lines change their positions relatively and shape a new form of the cloud. The shape of the cloud is important to help us predict where future support and resistance levels can be.
Before talking about our strategy let’s remember how the Senkou Span B is calculated.
Senkou Span B = (52 Period High – 52 Period Low) / 2
Senkou Span B is the bottom line of the Kumo cloud. Especially flat surfaces of the Senkou Span B provides very strong support and resistance. The flat surfaces of Senkou Span B are usually significant Fibonacci levels. The reason behind, dividing 2 the subtraction of 52-period value usually coincides with the %50 Fibonacci level.
There are in fact multiple Senkou Span B Strategies exist. Here I will explain only 2 of them.
To use the Senkou Span B strategy, turn all the other elements off the Ichimoku system. Leave only Senkou Span B line visible on your charting software.
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I also will use the RSI indicator to spot overbought and oversold levels. In reality, there are no oversold or overbought in the markets. I will use the RSI indicator for confirmation only. It is said that 80% of all trading is run by the algorithm bots. These bots like using RSI and Fibonacci levels. So, I do the same.
Looking at the above chart, the market could be profitably shorted at all marked points.
Strategy 1: Senkou Span B Bounces
Senkou Span B provides strong support during an uptrend, and it acts as a strong resistance during a downtrend. If you can spot an ongoing downtrend with an overbought signal on RSI indicator you can take short trades. We have only mentioned so far how to enter a trade by using Senkou Span B. Let’s talk about how to close a trade we are in.
Option #1: Price Crosses Other Side Of The Senkou Span B Line
To exit a trade you can wait for the price crosses to the other side of the Senkou Span B line.
Option #2: Use Fibonacci Pivot Levels As Your Profit Target
Fibonacci pivot levels are almost available on all charting software. They are a very reliable, and important part of my trading strategies.
Option #3: Wait For RSI Indicator Gives You An Oversold Signal
You can wait for the RSI indicator to give you an oversold signal if you are shorting the market. This one is the least reliable exit strategy according to my experience.
Strategy 2: Senkou Span B Breakouts
Our second strategy focuses on the breakouts of the Senkou Span B, whereas our first strategy focused on the bounces of Senkou Span B.
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