As we read in the last article, How to use Ichimoku Cloud in Forex?:
But there is an interesting question. What is the best Ichimoku indicator settings?
As we know, below are the main Ichimoku components:
So we want to test two major Ichimoku settings, 7,22,44 and 9,26,52. How can we do that?
What we find out when we compared different Ichimoku settings? :
The Ichimoku cloud indicator was created to show on the chart support and resistance, trend direction, momentum at the same time. The Tenkan and Kijun Sens lines from the Ichimoku indicator are used as a moving average crossover signal and indicate a trend change. The Ichimoku “cloud” represents current and historical price action and defines the current trend (above the cloud is rising trend and below is downtrend). Default Ichimoku settings are 9 for the Conversion Line ( Tenkan-sen), 26 for the Base Line (Kyun-sen ), and 52 for the Leading Span B (Senkou Span B). It is several percent better in testing than Ichimoku settings 7 22 44 (Tenkan-sen is 7, Kyun-sen is 22, and Senkou Span B is 44 ). We tested these two most commonly used settings on the Daily chart for the last 20 years. Major pairs EURJPY, GBPJPY, AUDJPY, USDJPY, NZDJPY, were used.
Let us see the Ichimoku cloud strategy based on rules for long and short trade:
But if the default red Tenkan Sen line crosses above the default blue Kijun sen line and both lines and the price is above the cloud on Daily Chart.
Sell if the Red Tenkan Sen line crosses below the Blue line while the price and both lines are found under the cloud.
Stop-loss 1 Daily Average true range for the last 14 days.
Target the same.
After testing, almost 4% of results are better using default settings 9,26,52.
What are the best Ichimoku settings for forex?
The default Ichimoku settings of 9-26-52 for forex trading showed the best results in the case study. Of course, Ichimoku settings can be adjusted to suit a 5-day week at 7-22-44, then 9-30-60, or 12-24-120 for trending markets.