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Dynamic Kumo Forex Trading Strategy

Trading in the forex market doesn't have to be difficult. Contrary to popular belief, trading does not require superior intelligence for a trader to be successful. Instead, it just requires a logical strategy that can produce a trade setup with a decent profit probability, and a trader who has the discipline to follow their trading plan without being overly influenced by greed or fear.

A complex strategy does not always equal a profitable strategy. In fact, complex strategies can often contribute to more psychological stress on traders. Complex strategies often mean that traders have to pay attention to many things when trading a strategy. This can make traders more prone to making mistakes due to stress. Complex strategies also tend to result in less trades. This means that a single loss can be devastating for a trader, which can put even more psychological stress on traders.

Simple strategies, on the other hand, tend to be very easy to follow. This allows the trader to have a carefree attitude towards every trade. This then allows them to apply the law of large numbers to their strategy. If they can choose a decent trading setup based on their strategy, there is a high chance that the trader can make consistent profits in the long run with a simple strategy.

The Dynamic Kumo Forex Trading Strategy is a simple trend following strategy based on only two indicators. This setup keeps the chart clutter low and provides only the essentials for identifying viable trades.

ichimoku cloud

Kumo literally means “cloud” in Japanese. Ichimoku Cloud or Kumo is part of the Ichimoku Kinko Hyo system or indicator.

The Ichimoku Kinko Hyo indicator consists of five lines. The Tenkan-Sen line represents the short-term trend. The Kijun-Sen line represents the medium-term trend. The Chikou Span represents the current price action. The Up Kumo or Senkou Span A and Down Kumo or Senkou Span B lines are part of the Kumo, which is a long-term trend.

Senkou Span A is basically the median between Tenkan-sen and Kijun-sen which has shifted 26 periods ahead.

Senkou Span B is the average price of the last 52 periods, shifting into the future by 26 periods.

The long-term trend is identified by the overlap of these two lines. When Senkou Span A is above Senkou Span B, the market is considered bullish in the long term. On the other hand, if Senkou Span A is below Senkou Span B, the market is considered bearish.

Kumo is usually used as a long-term trend filter. Traders avoid trading against the long term trend based on the kumo. The area between the two lines can also be used as a dynamic support or resistance area where traders can expect prices to surge. Finally, there are also traders who use the cross of the two lines as a signal of a long-term trend reversal.

Stochastic cross warning

The Stochastic Cross Alert indicator is a momentum reversal signal indicator based on the Stochastic Oscillator.

The classic stochastic oscillator is mainly used to identify the direction of momentum and reversals based on recent historical price action. It draws two stochastic lines that oscillate in the range from 0 to 100. A bullish signal is generated whenever the faster line crosses the slower line. On the other hand, a bearish signal is generated whenever the faster line crosses below the slower line. It also has markers at levels 20 and 80. These levels indicate oversold and overbought points. Crossovers in this area tend to have a higher probability as the price reverses direction at the point where it is already oversold or overbought.

Stochastic Cross Alert simplifies the process of identifying momentum reversals. It simply draws an arrow on the relevant candle where it detects a high probability impulse reversal based on the underlying Stochastic Oscillator setting.