Classifying Ichimoku Trend and Range Setups with Cloud Alignment

Summary

The document proposes an Ichimoku-based classifier for market regime and trade setup. It compares price with the cloud and checks whether the current and forward clouds share the same direction. It assigns positive or negative values to bullish or bearish trends and ranges, while a neutral value marks chop or price inside the cloud. The indicator is intended to guide which kind of strategy to consider, rather than to trigger entries by itself.

Examples pair a bullish-range setup with an RSI(14) move out of overbought territory and a bearish-trend setup with RSI crossing below 50. The author says the approach suits swing and range trading but misses the beginning of trends because it excludes Kumo breakouts. The document describes an indicator concept and illustrative entry combinations, but supplies no backtest results or evidence that the regime labels improve performance. Its suitability therefore remains a hypothesis to test across instruments and market conditions.

Key ideas

• The classifier uses price location and current and forward cloud color alignment to label trend, range, or chop.
• Positive and negative readings distinguish bullish and bearish regimes, while zero signals no-trade conditions.
• The indicator defines a setup and can be combined with a separate RSI rule for entries.
• Excluding Kumo breakouts may cause the method to miss the early phase of new trends.
• The document offers examples but no performance evidence from backtesting.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.