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Ichimoku Kinko Hyo Trading Indicator

Ichimoku Kinko Hyo is a Japanese charting technique that was developed 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 Kinko Hyo means, 'a glance at an equilibrium chart'. Ichimoku attempts to identify the likely direction of price & help the trader to determine the most suitable time to enter or exit the market.

Ichimoku Kinko Hyo Technical Analysis on Charts - How Do I Use Ichimoku Kinko Hyo MT4 Indicator?

Calculation

This indicator consists of five lines plotted using the midpoints of previous highs and lows. The five 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 close 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 past 52 price periods, drawn 26 price periods ahead

Kumo: Cloud: area between Senkou Span A and B

FX Technical Analysis and How to Generate Signals

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

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

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

Ichimoku Kinko Hyo Analysis on Charts - How Do I Use Ichimoku Kinko Hyo MT4 Indicator?

Analysis in Forex Trading

Bullish cross over signal occurs above the Kumo (clouds),

Strong buy trade signal.

Bearish crossover signal occurs 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 & Resistance Levels

Support and resistance zones can be predicted by the presence of Kumo (clouds). The Kumo can also be used to identify the prevailing trend of the market.

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

Chikou Span or Lagging Span is also used to measure the momentum 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 given, then the strength of trend is downwards, otherwise the signal is considered to be a weak sell signal.
  • If there a bullish signal and the Chikou Span is above the price of the last 26 periods ago, then the strength of trend is to the upside, otherwise it is considered to be a weak buy signal.

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