Breakout is an extremely effective trading strategy for traders on financial markets such as stocks, forex, or cryptocurrencies. This is a way of trading where traders take advantage of price breakouts to make profits. They often combine it with technical trend indicators to win the whole bullish or bearish wave at the starting point. If you are a follower of the Ichimoku system, you shouldn’t ignore this extremely cool Kumo Cloud Breakout trading method.
What is the Kumo Cloud Breakout of the Ichimoku system?
Although generally understood as a breakout of the price from an important level, Kumo cloud breakout has many different forms. It depends on the characteristics of the previous cloud and the evolution of the Breakout process. Each form will have different characteristics, different breakout success rates and different ways of trading.
You can use this strategy in any timeframe. But it is most effective in large frames such as days, weeks, months. This is the simplest and most effective trading technique in the Ichimoku system. Because it only uses the Kumo cloud and the relationship with the price to signal the correct entry.
Buy when the price breaks out from below and closes above Kumo cloud.
Sell when the price breaks out from above and closes below the Kumo cloud.
At the GPB/USD currency pair, the price started to break out of the Kumo cloud with a strong bullish green candle. In addition, the price has broken out from the bullish cloud which is considered a strong BUY signal. From there, you can place a BUY order at point A with a stop loss below the cloud. It is also the low of the Breakout candle. When the price started to penetrate the Kumo cloud, it was also the time to exit the order at point B.
It is possible to combine additional signals from the Kumo cloud to confirm the signal. If the cloud is bullish and the price is above the cloud, it is a strong BUY signal and vice versa. If the trend of the Kumo cloud is not in the same direction as the breakout price, you should wait for the cloud to be in line with the price to enter the order.
Tips when trading the Breakout method with the Kumo cloud
Clearly identify the trend before the price breaks out. You should wait for the price to break out of the main trend to enter the order most safely.
Profit always comes with risk. You need to accept that. However, with the Kumo cloud breakout method, we will have an advantage when the profit earned exceeds the losing order.
Set a clear profit target in advance to preserve your capital as well as increase it. Before investing, you should determine where to conduct transactions, where to stop loss.
Take a look at the larger time frame to confirm the correct breakout. Particular attention should be paid to news that strongly affects the currency pair being traded. That will help you avoid false breakouts.
Wish you success with this simple but extremely trading strategy.
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