trading requires for the price to trade above the Cloud because that’s a signal and potentially the beginning of a new up-trend.
The cloud is built to highlight levels and it’s supposed to highlight several layers deep because are not a single line drawn in the sand, but several layers deep.
So, when we break above or below the that signals a deep shift in the market sentiment.
Step #2 Wait for the Crossover: The Conversion Line needs to break above the Base Line.
The price breakout above the Cloud needs to be followed by the crossover of the Conversion Line above the Base Line. Once these two conditions are fulfilled only then we can look to enter a trade.
As you can notice the indicator is a very complex technical indicator that can be used even as a moving average crossover strategy.
Now, we’re going to lay down a very simple entry technique for the Kinko Hyo trading system.
Step #3 Buy after the crossover at the opening of the next candle
Ideally, any long trades taken using the strategy are taken when the price is trading above the Cloud. Our team at TGS website has adopted a more conservative approach and added an extra factor of confluence before pulling the trigger on a trade.
So, after the crossover we buy at the opening of the next candle.
Step #4 Place protective stop loss below the breakout candle
The ideal location to hide our protective stop loss is below the low of the breakout candle. This trading technique accomplishes two major things.
Firstly, it’s minimizing significantly the risk of losing big money and secondly, it helps us trade with the market order flow.
Since this is a swing trading strategy we’re looking to capture as much as possible from this presumably new trend and we’ll be looking to trail our stop loss level below the Cloud or exit the position once a new crossover happens in the opposite direction.
Step #5 Take Profit when the Conversion Line crosses below the Base Line
We only need one simple condition to be satisfied for our take profit strategy.
When the conversion line crosses below the base line we want to take profits and exit our trade.
Alternatively, you can wait until the price breaks below the Cloud but this means risking to lose some parts of your profits. In order to gain more sometimes you have to be willing to lose some.
Note** the above was an example of a BUY trade using the advanced trading strategies. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.
Stop Loss adjusted
Waiting for Step 5 to exit trade