{"id":643206,"date":"2024-10-18T15:00:38","date_gmt":"2024-10-18T13:00:38","guid":{"rendered":"https:\/\/ftmo.com\/?p=643206"},"modified":"2024-10-18T15:15:28","modified_gmt":"2024-10-18T13:15:28","slug":"top-down-analysis-using-ichimoku-rsi-and-fibonacci","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/top-down-analysis-using-ichimoku-rsi-and-fibonacci\/","title":{"rendered":"Top-down analysis using Ichimoku, RSI and Fibonacci"},"content":{"rendered":"
We are introducing a sophisticated trading strategy that combines technical analysis with the use of several advanced indicators and multi-timeframe analysis. The strategy focuses on the effective identification of the main trend, corrections and the precise timing of entries and exits.<\/em><\/p>\n The key components of the described strategy are Ichimoku Kinko Hyo (Ichimoku Cloud), Relative Strength Index (RSI) and Fibonacci retracement, which together enable a comprehensive market analysis and increase the probability of success. At the very end, we will also look at a specific example of this strategy.<\/p>\n Ichimoku Kinko Hyo (Ichimoku Cloud)<\/strong> provides a comprehensive overview of market conditions, including current trend, support, resistance and future market direction. Ichimoku Cloud includes several components:<\/p>\n The Kijun Sen (red line) is also known as the baseline, which is calculated by averaging the lowest low and highest high over the last 26 periods.<\/p>\n Tenkan Sen (blue line) is also known as the conversion line, which is calculated by averaging the lowest low and highest high over the last 9 periods.<\/p>\n The Chikou Span (green line) is also known as the lagging line. It shows the closing price delayed by 26 periods.<\/p>\n The Ichimoku Cloud consists of two Senkou Span lines that serve as the borders of the cloud. The first line is calculated as the average of the Tenkan Sen and Kijun Sen and is plotted 26 periods ahead. The second line is calculated as the average of the lowest minimum and highest maximum over the last 52 periods and plotted 26 periods ahead.<\/p>\n <\/a><\/p>\n The Relative Strength Index (RSI)<\/strong> is an oscillator that measures the strength and speed of price changes over a period of time. RSI values above 70 indicate an overbought market, while values below 30 indicate an oversold market.<\/p>\n Fibonacci retracement and expansion<\/strong> are key horizontal lines that identify possible support and resistance levels based on previous price movements. The Fibonacci retracement (38.2%, 50%, 61.8%) is typically used to identify possible corrections, while the Fibonacci expansion (161.8%) can serve as a target level for exiting a position.<\/p>\n Multi-timeframe analysis (top-down analysis)<\/strong> allows traders to analyse the market on several timeframes simultaneously. The main trend is identified on the higher time frame (e.g. daily chart), while position entries are timed on the lower time frame (e.g. 1H chart).<\/p>\n Step 1:<\/strong> Identify the trend on a higher time frame using Ichimoku Cloud.<\/p>\n On a higher timeframe (e.g. daily chart) we analyse the overall trend using Ichimoku Cloud. A price above the cloud indicates an increasing trend, while a price below the cloud indicates a decreasing trend. This step allows us to identify the main direction of the market, which is crucial for timing the entry on the lower timeframe.<\/p>\n Step 2:<\/strong> Fibonacci retracement to identify corrections.<\/p>\n After identifying the main trend, we apply Fibonacci retracement on the higher time frame to identify key support and resistance levels. The 38.2%, 50% and 61.8% levels represent important zones where market corrections can occur and therefore opportunities for position entry.<\/p>\n Step 3:<\/strong> Confirm entry on the lower timeframe using the RSI and Ichimoku Cloud.<\/p>\n On the lower timeframe (e.g. 1H chart) we are looking for confirmation of the trend and market strength. The price must be above the cloud (for long positions) or below the cloud (for short positions), while the RSI must be in a favourable range:<\/p>\n – For a long position: the RSI should be in the range of 30-50, indicating a weaker market with upside potential.<\/p>\n – For a short position: the RSI should be in the 50-70 range, indicating that the market may be overbought and likely to decline.<\/p>\nThe strategy uses the following technical indicators and concepts<\/h3>\n
Trading strategy rules<\/h2>\n