Steemit Crypto Academy – Season 3 - Week 5 - Post for @kouba01

Question 1 - Discuss your understanding of Kumo, as well as its two lines.

Kumo Cloud

In cryptocurrency technical analysis, the Kumo cloud which is also known as the Ichimoku cloud is a very popular technical analysis indicator that helps determine support and resistance levels on a cryptocurrency price chart. This indicator is considered as an all-in-one indicator and is usually used by traders to determine the momentum on a price chart. The Kumo cloud is also a trend-following indicator which means that it can be used to predict future trends and price movements.

The Kumo cloud is one of those technical indicators that look very complicated on the outside but is actually not that complicated to understand and is without a doubt a very powerful indicator that provide a lot of signals on a chart. Using the Kumo cloud indicator, traders can spot great signals on a chart and also determine the current trend in the market so as to know the potential entry and exit points by giving unique perspective on support and resistance levels. Using the kumo cloud to identify support and resistance areas, traders take notice of the position of the price and the kumo cloud. When the kumo cloud is below the price, it becomes the support and when the kumo cloud is above the price, it becomes the resistance.

AAVE/USDT Chart

Kumo Cloud Lines

The Kumo Cloud is made up of two lines, the Leading Span A and the Leading Span B. Both the leading line A and the leading line B work hand-in-hand as the kumo cloud is in-between the leading span A line and the leading span B line.

• Senkou Span A - The Senkou span A line is also known as the leading Span A. It is the first line of the Kumo cloud. The leading span A line is used for signaling future support and resistance areas on a cryptocurrency chart. It makes use of historical data to determine future trend of the market. Also, the leading line A above the Senkou span B can signal that the market is bullish. Calculating the Senkou Span A is basically done by adding of the conversion line and the base line and dividing the result by two. This is then projected 26 periods ahead. In the chart below, the Senkou span A is above the Senkou span B which signals bullish. On the chart, the market is bullish because the Senkou span A is above the Senkou span B.

AAVE/USDT Chart

• Senkou Span B - The Senkou span B line is also known as the leading Span B. It is the second line of the Kumo cloud. The leading span B line is very similar to the leading span A, however, they are both calculated differently. In the leading line B, the edge of the kumo that was formed from the resulting line is used for determining future support and resistance areas. Also, the leading line B above the Senkou span A can signal that the market is bearish. To calculate the Senkou span B, highest high + the lowest low on the past 52 periods, divided by two which is then projected 26 periods ahead. In the chart below, the Senkou span B is above the Senkou span A which signals bearish. On the chart, the market is bullish because the Senkou span B is below the Senkou span A.

AAVE/USDT Chart

Question 2 - What is the relationship between this cloud and the price movement? And how do you determine resistance and support levels using Kumo?

• The relationship between the kumo cloud and price movement is that the when the kumo cloud is below the price, it becomes the support and signals that the price is bullish. Also when the kumo cloud is above the price, it becomes the resistance and signals that the price is bearish.

• The colour of the kumo cloud is also a great indicator of the price movement. When the kumo cloud is red, it is an indication that the price movement is bearish, and when the kumo cloud is green, it is an indication that the price movement is bullish.

• The Kumo cloud determines dynamic support and resistance areas based on the price movements. When the market is in an uptrend, the longer the price stays higher than the kumo cloud. When the price is in a downtrend, the longer the price stays lower than the kumo cloud. In other words, the price movement is either uptrend or downtrend depending on whether the kumo cloud is below or above the price.

• Also, the size of the kumo cloud indicates whether the support or resistance is strong. A wide kumo cloud indicates the strength of the support or resistance. On the other hand, a thin kumo cloud indicates the weakness of the support or resistance.

How to determine resistance and support levels using Kumo

To determine resistance and support levels using kumo, there are few factors that have to be taken into consideration.

On the chart, the position and level of the kumo cloud in relation to the price is one of the factors that is taken into consideration when determining support and resistance. Kumo cloud determines dynamic support and resistance areas based on the price movements. When the market is in an uptrend, the longer the price stays higher than the kumo cloud. When the price is in a downtrend, the longer the price stays lower than the kumo cloud.

The colour of the kumo cloud is also another factor to consider in order to determine support and resistance.

Flat tops and flat bottoms in the kumo cloud is also another factor to consider when determining resistance and support on a chart. To use this, place a horizontal line on the flat tops and flat bottoms to clearly see the level of support and resistance.

BTC/USDT chart

The thickness of the kumo cloud is also another factor to consider when determining level of support and resistance. The thicker the kumo cloud, the stronger the support or resistance level.

BTC/USDT Chart

BTC/USDT Chart

Question 3 - How and why is the twist formed? And once we've "seen" the twist, how do we use it in our trading?

The twist that forms on the kumo cloud is another trading strategy that can be used in trading as it provides great signals on what is happening in the market by taking into consideration that the lines of the cloud are projected ahead by 26 periods.

How the twist is formed is by the Senkou Span A crossing the Senkou Span B from below, or the Senkou Span B crossing the Senkou Span A from below.

The reason why the twist is formed is because of the price action and market movement. When the Senkou Span A crosses over the Senkou Span B, it indicates that the market is bullish. And when the Senkou Span B crosses over the Senkou Span A, it signals that the market is bearish.

To make use of the twist in trading, there are things that have to be considered.

For Entry

When the Senkou Span A is below and crosses above the Senkou Span B, and the price is higher than the kumo cloud, it indicates a strong buy signal.

When the Senkou Span A is below and crosses above the Senkou Span B, and the price is lower than the kumo cloud, it indicates a weak buy signal.

For Exit

When the Senkou Span A is above and crosses below the Senkou Span B, and the price is lower than the kumo cloud, it indicates a strong sell signal.

When the Senkou Span A is above and crosses below the Senkou Span B, and the price is higher than the kumo cloud, it indicates a weak sell signal.

Question 4 - What is the Ichimoku trend confirmation strategy with the cloud (Kumo)? And what are the signals that detect a trend reversal?

When it comes to Ichimoku trend confirmation strategy with the Kumo cloud, there are factors that signals a trend reversal. The Kumo cloud shows dynamic support and resistance based on the price movements. When the market is in an uptrend, the longer the price stays higher than the kumo cloud. When the price is in a downtrend, the longer the price stays lower than the kumo cloud. In other words, the price movement is either uptrend or downtrend depending on whether the price is higher or lower than the kumo cloud.

The Senkou Span A coming from below in a downtrend and crossing above the Senkou Span B, and the price is higher than the kumo cloud, is a strong signal of a trend reversal. The kumo cloud colour is another signal for a potential trend reversal. When the kumo cloud changes from red to green, it can be a signal that there is potential trend reversal.

The kumo break is a strong signal that detect a potential trend reversal. When the price is in a downtrend and breaks above the kumo cloud, it is a strong signal that there could be a potential trend reversal to an uptrend. On the ETH/USDT chart, we can see that the Senkou Span A came from below in a downtrend and crossed above the Senkou Span B. We can also see that the price broke above the kumo cloud and stayed above the kumo cloud which was a strong signal of an uptrend.

ETH/USDT Chart

Question 5 - Explain the trading strategy using the cloud and the chikou span together

The Chikou span and the Tenkan-sen are key elements along with the kumo cloud. The lagging span is a great way to confirm the trend with the kumo cloud. When the lagging (Chikou) span line is above the conversion (Tenkan-sen) line after the price has broken above the kumo cloud, it is a confirmation for an uptrend.

On the ETH/USDT chart, we see the kumo break after the trend reversal where price broke above the kumo cloud after a downtrend. We can also see that the Senkou Span A was below and crosses above the Senkou Span B, which is an indication of an uptrend. The lagging (Chikou) span line was below and crossed above the conversion (Tenkan-sen). After price broke above the Kumo cloud, price stayed above the Kumo cloud and the lagging (Chikou) span line also stayed above conversion (Tenkan-sen) which was a confirmation that for the uptrend.

ETH/USDT Chart

Question 6 - Explain the use of the Ichimoku indicator for the scalping trading strategy

The Ichimoku indicator is a great and powerful indicator that is used as a scalping strategy. to trade using the Ichimoku strategy, the factor that needs to be considered is closing position of the lower time frame candle stick in relation to the kumo cloud. When the candlestick forms below the kumo cloud and breaks and closes above the Senkou Span A, it becomes a buy signal. Also, when the candlestick forms above the kumo cloud and breaks and closes below the Senkou Span A, it becomes a sell signal. Also, the Chikou span line is above the price which was an indication that price is bullish.

On the 5 minutes time frame, when the candlestick forms below the kumo cloud and breaks and closes inside the kumo cloud, it becomes a buy signal. Also, when the candlestick forms above the kumo cloud and breaks and closes inside the kumo cloud, it becomes a sell signal. On the MATIC/USDT 5 minutes chart, we can see the point where the candlestick which was below the kumo cloud, closed inside the kumo cloud. That was a good entry signal. With a 1:1 profit/loss ratio, profit was made from the trade. Also, the Chikou span line was above the price which was a bullish signal to enter the trade.

MATIC/USDT Chart

Conclusion

When it comes to trading any cryptocurrency asset, technical indicators play a very important role in helping cryptocurrency traders better trading decisions so as to make the most profit from their trade. The Ichimoku cloud indicator has proven to be a very useful and powerful all-in-one indicator that is used by many traders for technical analysis of any cryptocurrency asset. The Kumo cloud is a very popular technical analysis indicator that helps determine support and resistance levels on a cryptocurrency price chart. This indicator is considered as an all-in-one indicator and is usually used by traders to determine the momentum on a price chart. The Kumo cloud is also a trend-following indicator which means that it can be used to predict future trends and price movements. However, it is important to know that there is no single indicator that does it all, and even though the Ichimoku cloud indicator is considered as a very powerful all-in-one indicator, it is still important to combine it with other indicators for further confirmations and better trading decisions.

@kouba01