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§5.13 The third version of a trading strategy

As a matter of principle, the Ichimoku indicator may be considered as a version of a complete trading strategy (except for those principles mentioned above pertaining to workflow which every trader should set out himself).

In particular, one can create the following trading strategy based on the Ichimoku indicator:

  • Trade only if the price is in the “cloud”.
  • Buy an option when the Tenkan line crosses the Kijun line or the “cloud” changes its color or the price exits the “cloud”.
  • The Chikou Span line must confirm (or at least not contradict) the received signal.

Ишимоку торговая система

If you wish to gain the highest probability of success, while reducing the frequency of triggering,   then you may set the condition of simultaneous intersection of the Tenkan line and the Kijun line and the price’s exit from the “cloud”. You may use one more indicator – for example, the RAVI indicator which is good to use because it is created below the chart (there are already many lines drawn on the chart).

Some final advice about indicators

  • If you use several indicators
  • If you use several indicators which are created on the price chart then make a copy of the chart in a separate window so that every indicator takes its own place and the screen doesn’t become a network of lines.
  • When using a simple indicator it is recommended to verify its readings by applying your knowledge in the sphere of chart patterns, candles/bars and other market signals.
  • Keep in mind that every indicator needs to be reset by changing its parameters (numbers in the formula). Every indicator has a little window with these numbers where one can define the required coordinates. By doing so, your indicator will not lag behind the market or send you false signals.

Exploiting all of the possibilities in technical analysis will create many opportunities for successful options trading. If you study all of these chapters then the time you’ve spent studying will certainly pay off.

Let’s repeat it one more time: knowledge of technical analysis is the key to a trader’s success.

§5.14 Using the idea of a channel when trading in options→