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Ichimoku Indicator

Ichimoku is a Japanese charting method that was developed and created by a Japanese newspaper writerjournalisteditor, with a pen name known of as Ichimoku Sanjin.

  • Ichimoku means: 'a glance' or 'a look'
  • Kinko means 'equilibrium' or 'balance'
  • Hyo is a Japanese word/term for "chart"

Thus, Ichimoku means, 'a glance at an equilibrium chart'. Ichimoku indicator attempts to identify & spot the likely direction of price & help the trader to determine the most suitable trading time to enter or exit the market.

Ichimoku Kinko Hyo Technical Analysis on Charts - How Do I Use Ichimoku MetaTrader 4 Indicator?

Calculation

This indicator consists of five lines plotted using the midpoints of previous highs and lows. The 5 lines are calculated as follows:

1) Tenkan Sen: Conversion Line: Red Line (Highest High + Lowest Low) / 2, for last 9 price periods

2) The Kijun-Sen: Base Line: Blue Line (Highest High + Lowest Low) / 2, for last 26 price periods

3) Chikou Span: Lagging Span: Green Color Line Today's closing price plotted 26 price periods behind

4) Senkou Span A: Leading Span A = (Tenkan-Sen + Kijun-Sen) / 2, drawn 26 price periods ahead

5) Senkou Span B: Leading Span-B: (Highest High + Lowest Low)/2, for the previous past 52 price periods, drawn 26 price periods ahead

Kumo: Cloud: area between Senkou Span A and B

Forex Technical Analysis and How to Generate Trading Signals

Bullish trading signal - Tenkan-Sen crosses Kijun-Sen from below.

Bearish trading signal - Tenkan-Sen crosses the Kijun-Sen from above.

However, there are different areas of strength for the buy and sell trade signals generated.

Ichimoku Kinko Hyo Analysis on fx Charts - How Do I Use Ichimoku MetaTrader 4 Indicator?

Analysis in FX Trading

Bullish crossover signal occurs and happens above the Kumo (clouds),

Strong buy trade signal.

Bearish crossover signal occurs and happens below the Kumo (clouds),

Strong sell signal.

If a bullish/ bearish cross over signal takes place within the Kumo (clouds) it is considered a medium strength buy/sell trade signal.

A bullish crossover which occurs below the clouds is considered a weak buy trade signal while a bearish cross over that occurs above the clouds is regarded a weak sell trade signal.

Support and Resistance Levels

Support & resistance levels can be predicted by presence of Kumo (clouds). The Kumo can also be used to spot & identify the ruling trend of the market.

  • If price is above Kumo, the current price trend is said to be upwards.
  • If the price is below Kumo, the current price trend is said to be downwards.

Chikou Span or Lagging Span is also used to measure the energy of the buy/sell trade signal.

  • If the Chikou Span indicator is below the closing price of the last 26 periods ago & a sell short signal is generated, then the momentum of trend is downward, otherwise the signal is considered to be a weak sell signal.
  • If there a bullish signal and the Chikou Span is above price of the last 26 periods ago, then the momentum of the trend is to the up-side, otherwise it's considered to be a weak buy trading signal.

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