Before we can look at this strategy, we must first look at the components of the Kumo. In this article, we refer them to as Span A and Span B respectively.
Span A is created through adding the Tenkan Line to the Kijun Line, then finding their average and plotting it 26 time periods ahead. Span B is formed by adding the highest ishimoku trading robot over the last 52 periods to the corresponding lowest low, then finding their average and plotting the result 26 periods ahead.
If the price is below the Kumo, then it is under resistance and it is better to be looking for shorts instead of longs. This is because price will stay on one side of the Kumo during a trend.
The farther the price action is from it, the stronger the trend and more volatile it is. How can we use it for Reversals? If the price is clearly above or below it, then when price action breaks the kumo, it can often signal a reversal.
The price was below the cloud for a long period on the left side of the chart and sold off massively. After a couple of attempts on the daily chart, the price broke above the cloud.
We know that the cloud represents support and resistance; hence, the pair breaking above it, then coming back to it again to treat it as support presented a great reversal opportunity, which you can see in the middle of the chart. By using the kumo, we can qualify the current reversal, which provides traders with a unique opportunity to bitcoin is alive take profits on current positions, or take a new reversal setup.