The was developed by Goichi Hosoda, a Japanese journalist, and published in the late 1960s. It provides more data points than the standard chart. While it seems complicated at first glance, those familiar with how to read the charts often find it easy to understand with well-defined trading signals.
The is composed of five lines or calculations, two of which comprise a cloud where the difference between the two lines is shaded in.
The lines include a nine-period average, a 26-period average, an average of those two averages, a 52-period average, and a lagging closing price line.
The cloud is a key part of the indicator. When the price is below the cloud, the trend is down. When the price is above the cloud, the trend is up.
The above trend signals are strengthened if the cloud is moving in the same direction as the price. For example, during an uptrend, the top of the cloud is moving up, or during a downtrend, the bottom of the cloud is moving down.
The is a trend following and provides identification of short-term trend direction. In this variation it utilises the 12-period as the fast and 26-period as the slow length EMAs, with signal smoothing set at 9.
This strategy combines the with the indicator to better enter trades.
Long/Short orders are placed when three basic signals are triggered.
- Tenkan-Sen is above the Kijun-Sen
- Chikou-Span is above the close of 26 bars ago
- Close is above the Kumo Cloud
- MACD line crosses over the signal line
- Tenkan-Sen is below the Kijun-Sen
- Chikou-Span is below the close of 26 bars ago
- Close is below the Kumo Cloud
- MACD line crosses under the signal line
The script is backtested from 1 June 2022 and provides good returns.
The strategy assumes each order is using 30% of the available coins to make the results more realistic and to simulate you only ran this strategy on 30% of your holdings. A trading fee of 0.1% is also taken into account and is aligned to the base fee applied on Binance.
This script also works well on MATIC (1h timeframe), AVA (45m timeframe), and BTC (30m timeframe).
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.