Ichimoku Kinko Hyo

Ichimoku Kinko Hyo is an indicator that defines a market trend, support and resistance levels, and provides trading signals. This indicator is a perfect match for daily and weekly charts.

When parameters are set, four different time periods are used. On these intervals the values of the indicator’s lines are based.

Ichimoku Kinko Hyo’s lines:

Tenkan-sen reflects an average price for the first time period; its value is defined by summing this period’s high and low and dividing it by 2.

Kijun-sen shows an average price for the second time period.

Senkou Span A demonstrates the midpoint between the previous lines. It is moved forward by the value of the second time period.

Senkou Span B is a price average for the third period of time moved forward by the value of the second time interval.

Chinkou Span illustrates the close price of a current candlestick put backward by the value of the second time period.

The distance between the Senkou Span lines is marked with different color and is called a cloud. When prices are in the cloud, the overall trend is flat. In this case the cloud boundaries form support and resistance levels. For example:

When a price is above the cloud, its upper line forms the first support; and the lower line, the second support.

If a price is below the cloud, its lower line creates the first resistance; and the upper line, the second resistance.

It is a buy signal when the Chinkou Span line crosses the price chart above. When this line crosses the chart below, it is a sell signal.

Kijun-sen is taken for a kind of a market dynamic’s indicator. When the price is above it, prices are likely to continue their rise. If the price breaks through it, the trend reversal is expected. Kijun-sen can also generate trading signals. Buy signal appears when the Tenkan-sen line crosses Kijun-sen above. Crossing below is a sell signal. Tenkan-sen acts as a market trend’s indicator. A trend exists when the line extends or shortens. If the line moves horizontally, the market has entered a channel.

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