Guidelines for Trading TK Cross

Guidelines for Trading TK Cross

Submitted by adil on Fri, 03/21/2014 - 05:53

Tenkan-Sen and Kijun-Sen have already been elaborated in earlier writings. These components of the Ichimoku Kinko Hyo tool present trend traders with tradable signals that are reliable and effective. The guidance below details how a binary option trader should take positions using TK cross in uptrend and downtrend markets.

Going Binary Long

The trader should deploy the price chart of their preferred asset. It may sound irrelevant at this juncture, but the trader should always choose a platform that offers comfortable usage of complex tools such as Ichimoku. On the price chart of the preferred asset, the trader should plot the Ichimoku on it from the relevant platform option. The charts chosen timeframe is of great importance because later on in the trade, the timeframe has a bearing on expiry time.

If the trader has the option, or if the trader feels comfortable, then a change in the color and font (boldness) of the TK lines is advisable for greater focus. In the chart below, the lines have been set as bold, where red line is Tenkan-Sen and blue line is Kijun-Sen.

For a long or uptrend trade, wait to ensure that Tenkan-Sen crosses over above Kijun-Sen. Furthermore, ensure that price action is comfortably above the Kumo (cloud). When the Tenkan-Sen line crosses over above the Kijun-Sen line, wait for a few candle bars to confirm that trend has entrenched. Also notice in the chart below how the distance has widened between Tenkan-Sen and Kijun-Sen line as the price moves up, and how this distance starts to close when trend ends.

While confirming the trend entrenchment, refer to MACD histogram for further solace found in blue bars, which highlight uptrend movement. Enter call trade after the trend has entrenched and allow an expiry time of at least two candle bars.

Going Binary Short

Strategy for going short through TK cross is opposite to the strategy used when going long. Select the price chart specifying the required timeframe on which the Ichimoku Kinko Hyo is to be plotted. Change the color of TK lines if the preference is to do so. Similar to the case for a long trade where Tenkan-Sen line stays above Kijun-Sen line for an uptrend, ensure that Kijun-Sen line has crossed below the Tenkan-Sen line to establish a downtrend, and that the price action is below Kijun-Sen line. Also, ensure that the Kumo or cloud is above the price action. Furthermore, observe the MACD histogram and ensure that where the crossover has occurred, the histogram shows red bars that indicate a downward trend.

These measures ensure that the price action is now entrenched in a downward trend. Here as well, before entering a put trade, observe the price action for a couple of candle bar at least. In that period, the distance between Kijun-Sen and Tenkan-Sen line should increase. Once these final factors have been taken in consideration, enter a put trade set for expiry at least a couple of candle bars ahead.