Ichimoku Technical Indicator
Ichimoku is a Japanese charting technique that was created before by a Japanese newspaper writer, with the pen name of Ichimoku Sanjin.
- Ichimoku means "a glance" or "one look"
- Kinko means "equilibrium" or "balance"
- Hyo is the Japanese word for "chart"
Thus, Ichimoku means, "a glance at an equilibrium chart". Ichimoku attempts to identify the likely direction of cfd price and help the trader to figure out the most suitable time to enter or exit the cfd market.
Calculation
This cfds technical indicator consists of five lines drawn using the midpoints of previous highs and lows. Five lines are calculated as follows:
1) Tenkan-Sen: Conversion Line: Red Line (Highest High + Lowest Low) / 2, for the last 9 cfd price periods
2) Kijun-Sen: Base Line: Blue Line (Highest High + Lowest Low) / 2, for the last 26 cfd price periods
3) Chikou Span: Lagging Span: Green Line Today's closing cfd price drawn 26 cfd price periods behind
4) Senkou Span A: Leading Span A = (Tenkan Sen + Kijun Sen) / 2, plotted 26 cfd price periods ahead
5) Senkou Span B: Leading Span B: (Highest High + Lowest Low) / 2, for the past 52 cfd price periods, drawn 26 cfd price periods ahead
Kumo: Cloud: area between Senkou Span A & B
CFDs Technical Analysis and Generating CFD Signals
Bullish signal - Tenkan-Sen crosses Kijun-Sen from below.
Bearish signal - Tenkan-Sen crosses the Kijun-Sen from above.
However, there are different levels of strength for the buy & sell cfd trade signals generated.
Technical Analysis in CFDs Trading
Bullish cross-over trading signal forms above the Kumo (clouds),
Very strong buy cfd trade signal.
Bearish crossover trading signal forms below the Kumo (clouds),
Very strong sell cfd trade signal.
If a bullish/ bearish cross-over trading signal takes place within the Kumo (clouds) it is considered a medium strength buy or sell cfd trade signal.
A bullish crossover that occurs below the clouds is considered a weak buy signal while a bearish crossover that occurs above the clouds is considered a weak sell cfd trade signal.
Support and Resistance Levels
Support & resistance levels can be predicted by the presence of Kumo (clouds). The Kumo can also be used to identify the current cfd trend of the cfds trading market.
- If cfd price is above the Kumo, the prevailing market cfd trend is said to be upwards.
- If cfd price is below the Kumo, the prevailing market cfd trend is said to be downwards.
Chikou Span or Lagging Span is also used to determine the strength of the buy or sell cfd trade signal.
- If the Chikou Span is below the closing cfd price of the last 26 periods ago and a sell short signal is given, then the strength of the cfd trend is downwards, otherwise the signal is considered to be a weak sell cfd trade signal.
- If there is a bullish signal and the Chikou Span is above the cfd price of the last 26 periods ago, then the strength of the cfd trend is to the upside, otherwise it is considered to be a weak buy cfd trade signal.
