Surfing intraday trends with Ichimoku
They call it the ‘Pipe’ and it’s one of the most deadly surf spots you can find on the planet.
Welcome to the Banzai Pipeline, just off the coast of Oahu in Hawaii. Waves average 9 feet high and can reach as high as 20 feet on a regular day.
But it’s not the waves that will do you in, it’s the shallow, razor-sharp reef that sits just below the surface. That’s known as the ‘Backdoor’. More than one famous surfer and photographer has met his fate in that same exact spot.
Despite this, thousands of tourists flock to this spot — with little or no surfing experience — all so that they can say they were there. One by one, they paddle out over the deadly reef on their rented surfboard, hoping to catch a wave they have no idea what to do with.
And one by one, they manage to get crushed.
The same exact scenario plays itself out in the ‘Pipe’ of any given futures market. Amateur retail traders venture into the market hoping to catch a profitable price action trend — only to have a full-on wipeout.
Sure, their intentions are noble and innocent enough. They study their charts, add their indicators, watch the news… and make their move. What could possibly go wrong?
If you’ve traded for any amount of time — you know the answer all too well.
Absolutely everything can go wrong.
Here’s the good news: The Ichimoku trading system can help remove the barriers to profit with just a few modest changes.
The key to this time-proven trend trading system? Simplicity.
The first step to mastering Ichimoku? Change your perspective.
Why starting with Renko Bricks will simplify trend trading
For the brave souls looking to catch the primary swell at the pipe, you’ll need to arrive either around 8:30 in the morning or around 8:55 at night. All of this, along with wind conditions and sea temperatures, comes courtesy of the daily surf report. An absolute must if you’re serious.
The beauty of the daily surf report? It makes spotting wave conditions incredibly simple and straightforward.
The same is true with Renko bricks.
For some reason, most traders are fixated on time-based candlesticks. This is odd because time-based candlesticks don’t tell you much at all. Even worse, they bring clutter and confusion to your chart.
The result? It’s very difficult to spot a trend as it unfolds.
Renko bricks on the other hand ignore time altogether and advance entirely based on price action. Simply set the brick size to reflect the amount of price action that you want to track.
This way, when the market is really making a move — you’ll be able to see it. And most importantly, you’ll be able to trade with it.
Check out the below ES example. This is the same exact trading session — yet the Renko chart makes it far easier to spot the trend. Why? Because it reflects actual price direction — not just price action.
For the Ichimoku trading system, understanding price direction is critical if you’re going to trade trends with the cloud.
And the number one issue most traders face when trying to trade trends?
Confusion. Noise. Clutter.
All the indicators. All the oscillators. And no clear picture of what’s really happening with price action.
Now that we’ve shifted our perspective… It’s time to add the cloud.
Easily entering trends in the cloud with Ichimoku
Any decent surf report will tell you not only when the tide will crest, but also the height and exact locations of the swells at each hour of the day. For those who are committed, this allows them to plan for the paddle journey out into the bay to ensure they’re in the right spot at the right time.
Those that don’t look at the surf report? They’re left to look up to the sky, stare at the clouds and hope for the best.
Not the case when trying to catch a trend to ride with the Ichimoku cloud.
In fact, with two simple additions to your chart, you will be spotting high-probability trends with ease — in absolute no time.
There are two basic tools…
The Cloud: Consisting of the top band, known as Span A… and the lower band, known as Span B — the cloud will expand and contract based on price action and the strength of any trend.
- The wider the cloud — the stronger your support and resistance levels are going to be.
Lagging Span: This is the primary cross-reference point with the cloud. Think of it as your confirmation tool to verify the conditions that you see in the cloud. The Lagging Span will help you visualize the relationship between current and prior trends so that you can spot potential reversals.
- If price is above the Span – you have bullish conditions
- If price is below the Span – you have bearish conditions
In the above ES example, you have just your basic Renko bricks and the Ichimoku cloud. Think of the Lagging Span as your partner riding shotgun on the way to spotting a trend to ride.
That’s it. That’s all you need.
Getting in for profitable entries and exits? Way easier than you think.
Two easy trend surfing setups with the cloud
There are waves that you can ride in the kind of glory that you’ll tell your grandkids about. And then there are waves that will crush your soul. Knowing which is which will save your life in the Pipe — and your account in the market.
Lucky for you, the Ichimoku trading system makes this very easy.
Why? Because, unlike many of the other price-based systems out there — Ichimoku tells you what to trade, and what to steer clear of.
You have two very easy-to-follow rules.
1. Buy: If price breaks above the cloud when it’s WIDE AND GREEN and the Lagging Span is ALSO ABOVE the cloud.
2. Sell: If price is below the cloud when it’s WIDE AND RED and the Lagging Span is ALSO BELOW the cloud.
Because Ichimoku measures the strength of a trend, it’s also able to spot the fakeouts and the wipeouts that many traders fall for.
You know the trends that never materialize… or worse yet, the ones that turn on you and then crush your account? Ichimoku is designed to help you avoid both. How? Again… It’s as simple as watching the cloud.
How Futures day traders can avoid cloud wipeouts
There’s a reason that Banzai Pipeline has claimed more lives than just about any other surfing location. It’s not just the reef, but how deceptive the depth is and how quickly the waves can overpower you.
It’s just simply far more shallow and far more violent than surfers anticipate.
By the time they’re falling — it’s already too late.
The same is true for many traders attempting to get in on a trend. By the time they realize they’re on the wrong side of the trend — it’s already too late.
This can be avoided simply by following the rules of what to avoid with the Ichimoku cloud. And it’s incredibly easy.
Here are three basic conditions to steer clear of:
Cloud Crossover: When the Lagging Span is crossing over the Cloud on both sides — or price is running through the cloud with ease… This means that there is market indecision.
Thin Cloud: If the Cloud isn’t wide you simply don’t have the strength to provide the support and resistance you need to keep the trend moving in the desired direction.
Lagging Span Position: Remember that the Lagging Span is your confirmation point. You need it either well above or well below price and the cloud. If it’s venturing too close, crossing or even touching the cloud — simply steer clear.
Avoid crossovers and thin clouds if you want to avoid Ichimoku wipeouts!
Finally, a word of warning as you wade into the deep waters of the market with your Renko bricks and Ichimoku cloud.
If you’re going to day trade with the Ichimoku strategy in a futures market — you need to make sure that your tools are properly calibrated. Many traders will attempt to use Ichimoku tools that are really designed for longer-term stock market positions.
The results are usually disastrous.
If you’re going to consistently enter confirmed trends using the Lagging Span and Ichimoku cloud — you need to have the following:
Properly Sized Bricks: Depending on your day trading timeframe, you need to make sure that your bricks are sized so that you don’t miss intraday trends — while not being distracted by every market flutter.
Futures Cloud: Given the fluid nature of any given futures market, you need to ensure that both your cloud and lagging span are specifically developed to properly reflect futures market movements. If you’re using a tool developed for stock market trading — or any other market — the cloud will not expand and contract properly.
The good news? There are plenty of tools developed specifically for futures day traders that won’t cost you an arm and a leg.
It’s time to get rid of all of those oscillators, indicators and confusing price action patterns. Simply add the cloud and surf the trends with confidence.
You’ll never look back once you start.