The Ichimoku with Elliott Waves strategy fuses the trend structure clarity of the Ichimoku Kinko Hyo system with the wave-based forecasting power of Elliott Wave Theory. This hybrid strategy helps traders identify trend phases, corrective patterns, and momentum zones, providing well-timed, high-probability trade setups based on both structure and market psychology.

It’s especially effective for intermediate to advanced traders in forex, crypto, commodities, and indices who want to combine visual simplicity with predictive market cycles.

Why Combine Ichimoku and Elliott Waves?

Ichimoku provides:

• Trend direction via the Kumo (cloud)
• Short- and mid-term equilibrium (Tenkan-sen and Kijun-sen)
• Entry and exit zones with leading and lagging confirmation
• Dynamic support and resistance

Elliott Waves provide:

• A framework to understand market cycles in five-wave trends and three-wave corrections
• Anticipation of wave continuation or reversal points
• Psychological context behind market moves

Together, they offer:

• Directional clarity (Ichimoku)
• Forecastable wave structure (Elliott)
• Dynamic confluence zones for entry and exit

Step-by-Step Strategy Guide

Step 1: Identify the Trend and Structure Using Ichimoku

Use the H4 or Daily timeframe to assess trend bias:

• Price above the Kumo = bullish trend
• Price below the Kumo = bearish trend
• Tenkan-sen above/below Kijun-sen confirms direction
• Chikou Span clear of price supports continuation

This provides a framework for whether you’re counting impulse waves (1–5) or corrections (A-B-C).

Step 2: Start Your Elliott Wave Count

In the direction of the confirmed trend:

• Label impulse waves (1, 2, 3, 4, 5)
  • Wave 3 is typically the strongest, often confirmed by a Kumo breakout
• Use corrective wave count (A-B-C) after a full 5-wave move ends
  • Often unfolds with price returning to Kijun-sen or into the Kumo

Use price structure and Fibonacci levels to validate wave relationships:

• Wave 2 typically retraces 50–61.8% of Wave 1
• Wave 4 often returns to the Kijun-sen or top of the cloud

Step 3: Align Wave Zones with Ichimoku Levels

• Wave 2 pullbacks often end at Kijun-sen or upper Kumo in an uptrend
• Wave 4 often respects Tenkan-sen or Kumo boundaries
• Corrective A-B-C structures typically unfold inside or toward the Kumo

This gives high-probability entry zones based on Ichimoku’s dynamic levels.

Step 4: Enter on Breakout or Retest

Ideal setups:

• Enter Wave 3 breakout from Kumo after Wave 2 correction
• Enter Wave 5 continuation after Wave 4 pullback to cloud
• Trade Wave C after rejection from Kumo or Chikou Span cross

Lower timeframes (M15–H1) can be used to refine entries with structure break or engulfing patterns.

Step 5: Stop Loss and Take Profit Rules

• Stop Loss:
  • Below Kumo or Kijun-sen for long trades
  • Above Kumo or Kijun-sen for shorts
  • Or just beyond the corrective low/high
• Take Profit:
  • Measure wave targets using Fibonacci extension (e.g. Wave 3 = 1.618 x Wave 1)
  • Trail with Kijun-sen or use Ichimoku flat lines for exhaustion signals
  • Exit before strong reversal zones or opposite Kumo edge

Example: Bullish Wave 3 Setup on GBP/USD

• H4 chart: Price breaks above the Kumo, Tenkan/Kijun bullish cross, Chikou Span clears price
• Wave 1 completed at 1.2650, Wave 2 retraced to 1.2520 (Kijun-sen)
• Wave 3 begins with strong momentum above cloud
• Entry: 1.2600
• Stop Loss: 1.2515
• Target: 1.2775 (1.618 extension of Wave 1)
• Reward-to-risk: 2.6:1

Best Confluences to Look For

• Wave 2 or 4 ending at Kumo edge or Kijun-sen
• Wave 3 starting with Kumo breakout and strong Tenkan/Kijun angle
• Wave C reversal confirmed by Chikou Span crossing price
• Wave 5 continuation showing volume spike and cloud support

Advantages of the Strategy

• Offers structure and predictability in trend trading
• Allows timing of entries during impulsive or corrective phases
• Uses dynamic levels instead of fixed zones
• Reduces risk of false breakouts by confirming with Ichimoku

Common Mistakes to Avoid

• Miscounting waves without validation from Ichimoku levels
• Entering trades mid-wave without a corrective retest
• Ignoring Chikou Span and Kumo shape for confirmation
• Trading during consolidation within the Kumo

Conclusion

The Ichimoku with Elliott Waves strategy empowers traders with a complete framework for identifying trend phases, pullbacks, and high-momentum continuations. Ichimoku provides real-time market structure, while Elliott Wave adds a predictive element that sharpens trade timing and confidence.

To learn how to master this strategy and apply it with real-world precision, explore our Trading Courses designed for traders who want to trade like professionals—with structure, logic, and forward vision.