Ichimoku cloud indicator has historically proven to be one of the most efficient in spotting trend reversals (see the short video below). It might look like as a sophisticated indicator as it is composed of 5 lines with unique parameters which are calculated based on the highest and lowest prices of the chosen period, but still an easy one to understand. In fact there are only 2 lines, which form the “cloud”, enough for technical analysis.
Here are the settings to get the exact setup as displayed in the video above:
Ichimoku cloud is also used to define support and resistance levels:
When the price of a cryptocurrency is above the cloud the trend is having a strong bullish momentum. Conversely, when the price is below the cloud the trend is having a bearish momentum.
Trend reversal occurs when the price breaches the cloud. The upside-down cloud break as displayed on the chart below is a perfect example of the market entering the downtrend. Plotted moving averages crossed by the price also confirm the bearish trend. Using ordinary exponential moving averages (EMA 50, EMA 100, EMA 200) together with the Ichimoku cloud make a powerful combination: