Advanced technical analysis usually involves using either multiple technical indicators or a rather sophisticated (i.e., complex) indicator. “Sophisticated” does not necessarily mean “better” – it just means more difficult to calculate than, say, an arithmetic average.
Technical analysis is a means of interpreting the price action over time of a security. Various technical indicators – such as moving averages – are added to a price chart in an attempt to discern probable future price movement.
The Ichimoku Cloud – which contains a collection of technical indicators – can appear a bit challenging or overly complex at first glance. However, once you understand all the parts, it’s actually pretty simple to use. While not as popular in the West, it’s long been the technical indicator of choice on many Asian trading desks.
The Ichimoku Cloud boasts one of the most unusual histories for a trading indicator. It wasn’t developed by a software engineer or even a mathematician, but by a Japanese newspaper reporter. Users of the Ichimoku Cloud refer to it as a “one glance” indicator because, when displayed on a chart, it presents such a striking visual representation of the market.
Well, let’s dissect the Ichimoku Cloud line-by-line. It consists of five lines, two of which are utilized together to form the “cloud.”
