Earlier this month I introduced the Ichimoku charting system, defining the components of the system. I also eluded to a simple strategy that utilises all these components – the teken sen/kijun sen cross. This simple strategy can be used in all time-frames, although I normally use this setup for swing trading. In response to a comment on this article, I would like to introduce another strategy that is more ideal for those of you who are more interested in day trading – the kijun sen setup. In this article, I will describe this setup in detail.
I advise you to read the previous article posted earlier this month if you either do not understand the main components of Ichimoku, or just need a refresher of the overall system. It can be found here: http://www.dukascopy.com/fxcomm/fx-article-contest/?Ichimoku-Trading-An-Introduction-With&action=read&id=1100
The Kijun Sen Cross for Day Trading
For this setup, I normally use two timeframes, 5 min and 30 min. The strategy can be summarised as follows:
- In both timeframes, wait for a candle to cross the kijun sen.
- Once a candle completes over the kijun sen in the lower timeframe, place an order using the kijun sen +/- 10 pips as a buffer.
- Change the stop-loss to breakeven +/- 5 pips once you have reached that level.
- Change the stop-loss to teken sen +/- 5 pips once you have reached 20 pips.
An Example from Today
I am going to use the EUR/USD charts from today (10th December 2012) to show how this typical trade strategy could have panned out. I will include two annotated charts at 5 min and 30 min to illustrate this strategy further - please feel free to refer to them as I walk through this trade.
At 10:45 there was a kijun sen/candle cross. The previous candle at 10:40 had also been testing this level. I normally feel more confident entering a trade when the body of the candle has closed fully above the kijun sen, and the next one starting above the kijun sen (i.e. so it has fully crossed over). Looking at a higher timeframe (30 min) confirms the trend that this indeed is a kijun sen crossover, and at this point, this would signal a trade entry at the next candlestick, 10:50, for a price of 1.29055. This completes steps 1 and 2 of my strategy.
In concordance with my trading strategy, I would have changed my stop-loss at 12:55 to a break-even level (step 3). By this time, the bullish trend was strengthening and the trade eventually exceeded 20 pips. This would signal the final step of my strategy (step 4), changing my stop-loss to the tekan sen, and my trade eventually stopped out at 14:05 for a price of 1.29309 – for a profit of 25 pips.
Chart 1: 5 min EUR/USD, 10th December 2012:
Chart 2: 30 min EUR/USD, 10th December 2012:
Hopefully this article has helped in explaining how Ichimoku can be used for successful day trading. Please feel free to comment, and good luck in the markets!