A popular market breadth indicator, the McClellan oscillator is one of the tools that MoneyShow's To...
A Tool for Trending Markets
01/08/2014 6:00 am EST
Andrew Keene discusses Ichimoku clouds—his favorite tool for trading trending markets—and he explains why he finds it so valuable.
TIM: My guest today is Andrew Keene, and we're talking about something called the Ichimoku Cloud and how you trade that, how he trades it with his strategy. Andrew, first of all, define for us, what is an Ichimoku Cloud?
ANDREW: Yeah, it's a Japanese technical trading, you know, and all the technical trading actually started in Japan. When I actually blew out of my account once in 2006 I went over to Asia, I met with a bunch of traders down there and they introduced me to this technical type of getting, and the best thing about it is it's just a plug-in in most platforms, so it's nothing I created or it's nothing that I'm trying to sell or anything. You can just, at Think Or Swim or Trade Station you can just put in the indicator and basically the best thing about it, it's not using movement averages, it shows you today's momentum, it shows you the past momentum, and then it shows you the future momentum, so within 10 seconds looking at the chart I can tell if it's bullish, how bullish it is, and how does the future look, and how does the past look.
TIM: All right. Is this something similar to a Bollinger Band where it gets to the top of the cloud, I'm looking to short and reverse -
ANDREW: It's actually probably the opposite of a Bollinger Band. Bollinger Bands are also trying to fade momentum, right, if it gets too much then you're trying to fade it, if it gets too low you're trying to fade it. I think with the Ichimoku Cloud is it works best in trending markets, in trending products, so by perfect example stock that's not trending is eBay. If you look at eBay on the daily chart it works best for daily charts, and the best thing with Ichimoku you can use it on any single product. You can use it on currencies, you can use it on futures, you can use it on stocks, you can day trade it.
I day traded with Apple, Twitter, and Facebook as well, so it's for a trending product. EBay is the epitome of trading range products, so it doesn't work well on that so just stick with the trending products. Like I said, it came from Japan. There's only three books in English written on the topic, my e-books are actually coming out next week and it's going to be great, I can't wait. It's my favorite technical indicator. It's very simple and easy to read.
TIM: How did you get to educate yourself on this and using it? How did you learn how to do it?
ANDREW: Yeah, I mean, well, like I said when I was in Asia I actually taught English in a Buddhist monastery for awhile and I met some traders over there, and you will not go to a dealer desk, and a dealer desk is just a group of traders, okay, you will not go anywhere in Japan that Ichimoku is not up on their charts, okay. In the United States a lot of people like to use moving averages here, 10, obviously the golden cross, when the 50 breaks to 200, so I tweaked it in my trading plan. When I traded on the floor I wasn't a big chart guy. I know when I moved upstairs that's one thing I needed to improve so I basically watched every YouTube video, every article, every book written about that, and I've really improved my skills on the topic.
TIM: So Andrew, where do I get the eBook?
ANDREW: You can get the eBook on Amazon.com or you can go to our web site KeeneOnTheMarket.com.
TIM: Andrew, thanks for your time.
ANDREW: Thank you.
TIM: You're watching the MoneyShow.com video network.
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