Zebu blog

Tag: Momentum

  • Ichimoku – The Little-Known Japanese Indicator

    Ichimoku, also known as the Ichimoku Kinko Hyo, is a Japanese technical indicator that is little-known outside of Japan. It is a comprehensive indicator that provides a lot of information in one chart and can be used to identify trends, support and resistance levels, and even generate trading signals.

    The Ichimoku indicator was developed in the 1930s by a Japanese journalist named Goichi Hosoda. The indicator is composed of five lines, each with a specific purpose: the Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and the Chikou Span.

    The Tenkan-sen, also known as the conversion line, is a moving average of the highest high and the lowest low over the past nine periods. It is used to identify short-term trends and can also be used to generate buy and sell signals.

    The Kijun-sen, also known as the base line, is a moving average of the highest high and the lowest low over the past 26 periods. It is used to identify medium-term trends and can also be used to generate buy and sell signals.

    The Senkou Span A, also known as the leading span A, is the midpoint between the Tenkan-sen and Kijun-sen. It is plotted 26 periods ahead and forms one of the boundaries of the “Ichimoku cloud.”

    The Senkou Span B, also known as the leading span B, is the midpoint between the highest high and the lowest low over the past 52 periods. It is plotted 26 periods ahead and forms the other boundary of the “Ichimoku cloud.”

    The Chikou Span, also known as the lagging span, is the current closing price plotted 26 periods behind. It is used to confirm trends and can also be used to generate buy and sell signals.

    The “Ichimoku cloud,” also known as the Kumo, is the area between the Senkou Span A and Senkou Span B lines. It is shaded to indicate a bullish or bearish trend. When the price is above the cloud, it is considered bullish and when the price is below the cloud, it is considered bearish.

    The Ichimoku indicator can be used in a variety of ways, but one of the most popular ways is to use it to identify trends. When the price is above the cloud, it is considered bullish and when the price is below the cloud, it is considered bearish. It is also possible to use Ichimoku to identify support and resistance levels by looking at the positions of the various lines.

    Another way to use the Ichimoku indicator is to generate trading signals. One of the most popular signals is the “golden cross,” which occurs when the Tenkan-sen crosses above the Kijun-sen. This is considered a bullish signal and can indicate that it is a good time to buy. On the other hand, a “death cross,” which occurs when the Tenkan-sen crosses below the Kijun-sen, is considered a bearish signal and can indicate that it is a good time to sell.

    Ichimoku is a comprehensive indicator that provides a lot of information in one chart. It can be used to identify trends, support and resistance levels, and even generate trading signals. However, it’s important to keep in mind that the Ichimoku indicator should be used in conjunction with other forms of analysis, such as fundamental analysis and other technical indicators, in order to make more informed trading decisions.

    It’s also worth noting that the Ichimoku indicator is not commonly used in the Western world and may not be supported by all charting software. However, for traders who are interested in using this indicator, specialized software can be found to support it.

  • The Anatomy Of A Perfect Breakout Trade

    Buying the breakout is a strategy in which you wait for an asset’s price to turn around and then try to invest in the early stages of its rise. (Some traders also use the word “breakout” to describe sharp price drops that happen after a time when prices went up or were stable.) When the decline stops and things start to get better again, this is called a “breakout.” The goal is to come together before the asset gains a lot of value.

    A retest happens when a stock price breakthrough is followed by a trend reversal and a return to a predetermined price range, such as the area around its 21-day simple moving average. Most of the time, the price goes back to where it was before the breakout. After that, it goes back to the way it moved before it broke out.

    When you buy the retest, you wait until after the breakout and buy the asset when it goes back into the range it was in before the breakout. This is helpful because it lets you move more methodically. You don’t have to invest right away because you don’t want to miss out. A retest also usually means that prices will be more stable in the future. The second breakthrough price range is more likely to hold.

    The problem with buying the breakout is, of course, that you can’t be sure when a breakout will happen until it has already happened. Even if an asset continues to lose value, its price can change from time to time. Sometimes, though, the asset has been revalued over a long period of time. In this case, any price changes will be made within a range of the new normal. You try to be right by making the best guess you can about what will happen to the price.

    And the problem with waiting for a retest is that it may never come. A very powerful breakout might be so strong that the price might breakout of a range and never move back inside if it. That is why, it is important for you to perform your own backtests and ensure that you choose a versatile strategy that lets you make the most of it.

    The most common indicator that intraday traders use to trade retest breakouts is the VWAP. It is the Volume Weighted Average Price that the price often moves to before moving again. For example, you mark the high and low of the 15 minute range of Nifty, and see a breakout happening at the high, then wait for it to come back to the VWAP before initiating a long trade. This will give you an attractive Risk:Reward Ratio.

    If you would like to start trading breakout strategies, open your best trading account with Zebu today.