This document is part two of a guide on trading using the Ichimoku cloud indicator. It discusses how to identify the trend direction by looking at whether the price is above or below the cloud, which indicates bullish or bearish sentiment. Only buy trades should be considered when the trend is bullish, and only sell trades when the trend is bearish. Every new trend starts with a breakout of the cloud, with bullish trends starting on an upward breakout and bearish on a downward breakout. No trades should be taken when the price is stuck inside the cloud with no clear trend.

1. Trading The Cloud – Part Two
Welcome to Part Two of my ichimoku trading guide - Trading the
Cloud. In the first part of the guide I introduced you to the Kumo cloud,
sorry it was so short, but I wanted to keep it 'bite sized' I think it is
easier for you to digest and simpler to teach.
I want to go into a little bit more detail about how price reacts to the
Kumo cloud and how this gives the trader a very strong idea on how
price is moving, and how you can start to predict future moves and
trades just by quickly glancing at the chart.
Ok so this leads me to the next part
Identifying Trend Direction
with the Kumo Cloud
The first thing we need to know as we look at the ichimoku chart is what
direction the price is moving.
Is it Bullish (Moving up) or Bearish (Moving down)
We do this by looking where price is in relation to the Kumo Cloud
If price is above the cloud then the sentiment is Bullish, if price is below
the sentiment is Bearish.
Take a look at this chart below

2. As you can see from the chart, it is easy to tell 'at a glance' whether price
is in a bullish mood or a bearish mood.
This is the foundation of trading ichimoku and should be the first thing
you look for before anything else. knowing the direction of the price tells
you what type of trades to look out for.
Bullish price = Only look for BUY trades, ignore any SELL trade
opportunities
Bearish price = Only look for SELL trades, ignore and BUY trade
opportunities
Knowing the direction of the trend is vital for traders, as straight away
we can filter out ANY fake signals and concentrate on the stronger
moves. By only looking for BUY or SELL trades at any one time, we
already save a lot of analysis, and it literally takes one glance at the chart
to tell us if we are looking for BULLISH trades or BEARISH trades.
Kumo Breakout
Every new trend starts with a Kumo breakout.

3. Before price can define a trend on either side of the Kumo, it must break
out of the Kumo Cloud, every time price breaks from the cloud, it starts
a new trend and tells us what type of signal to look out for.
Bullish trend = BUY signals
Bearish Trend = SELL signals
Take a look at this chart below
As you can see from the chart price enters the Kumo from the top then
moves around inside the Kumo cloud until it finally breaks out of the
bottom, thus creating a Bearish trend.
The Kumo breakout is actually a trading strategy in itself, where you can
open a trade as soon as price breaks the cloud, but I will cover this when
I talk about the ichimoku trading strategies in future updates.

4. No Trend No Trade
You will notice there are times when price gets stuck inside the cloud,
this is an area of no trend and is advised to stay away from opening any
trades until a clear trend is presented by a breakout on either side.
I will cover this more in the next lesson.
Until Next Time
Chris(admin)