Forex Ichimoku Cloud Trade

Entry Logic

• Entry triggers when the price breaks out of the Ichimoku cloud (Kumo), and the Tenkan-sen crosses above the Kijun-sen.
• Confirmation requires the Chikou span to be above the price for a long, or below the price for a short.
• Timeframe is the daily chart.
• Location is a change in the long-term trend.
• Market condition is the beginning of a new, sustained trend.

Exit Logic

• Profit target is open-ended.
• No scaling out.
• Trailing stop is the Kijun-sen.
• Exit on signal failure if the price closes back inside the Kumo.
• Exit on an opposite signal from a new Tenkan-sen/Kijun-sen cross in the opposite direction.
• No time expiration.
• Exit on momentum loss if the price consolidates for a long period.

Stop Loss Structure

• Hard stop is placed on the opposite side of the Kumo.
• No soft stop is used.
• Maximum dollar loss is 3% of account equity.
• Maximum percent loss is 3% of account equity.
• Structural stop is placed on the opposite side of the Kumo.

Risk Management Framework

• Risk per trade is 1.5% of the account.
• Maximum daily loss limit is not applicable for this long-term strategy.
• Maximum weekly loss limit is not applicable.
• Maximum drawdown allowed is 25%.
• Risk-reward ratio requirement is a minimum of 1:3.

Position Sizing Model

• Sizing is based on a fixed fractional model (1.5% of account per trade).
• No volatility adjustment is used.
• Conviction sizing is not used.
• No scaling in.
• No scaling out.

Trade Filtering

• Avoid trading when the price is inside the Kumo, as this indicates a ranging market.
• Requires a clear breakout of the Kumo.
• Instrument can be any major forex pair.
• This is a long-term position trade.
• Avoid trading when the Ichimoku signals are conflicting.

Context Framework

• Trend direction is determined by the location of the price relative to the Kumo.
• All Ichimoku components should be aligned to confirm the trend.
• The Kumo provides a dynamic support and resistance zone.
• Location is a breakout of the Kumo.
• Higher timeframe (weekly) should be in a similar trend.

Trade Management Rules

• This is a trend-following strategy.
• Let the trailing stop manage the trade.
• Do not add to the position.
• Be patient and let the trend develop.

Time Rules

• This is a long-term strategy, so time of day is not relevant.
• The focus is on the daily and weekly charts.
• No session-specific notes.

Setup Classification

• A+ setup: All Ichimoku components are aligned in the direction of the trend.
• A setup: Most Ichimoku components are aligned.
• B setup: Conflicting Ichimoku signals.
• C setup: Trading against the Ichimoku signals.

Market Selection Criteria

• Instrument can be any major forex pair.
• Requires a trending market.
• Volatility should be moderate to high.

Statistical Edge Metrics

• Expected win rate is 40%.
• Average win is 5R.
• Average loss is 1R.
• Profit factor is 2.0.
• Expectancy per trade is +1.0R.

Failure Conditions

• Strategy fails in ranging markets.
• Avoid trading when the Ichimoku components are flat and intertwined.

Psychological Rules

• Be disciplined to follow the trend and not exit too early.
• Trust the signals of the Ichimoku system.

Advanced Components

• The Ichimoku Kinko Hyo system is the key advanced component.
• No other filters are used.
• Multi-timeframe alignment with the weekly chart is essential.

Location

• Strongest at the beginning of a new, long-term trend.
• Weakest in a ranging market.
• The market condition is the most important factor.