The Ichimoku Kinko Hyo Indicator or only Ichimoku got its name from its author, a Japanese analyst named Hosoda who used a pseudonym of Ichimoku Sanjin. The author originally developed the program for the participants of the Japanese stock market. Due to this indicator, every trader can predict the movement of the trading platform index. As a result, the program was modified for use in the foreign exchange market.
The Ichimoku indicator is a potent tool for technical analysis. It can quickly determine the presence and direction of a price trend, identify the levels of support and resistance, and allows to work during flat. Also, the program accurately signals the best moments to open the orders.
The author argued that this tool shows the highest efficiency if it is applied to daily and weekly graphs. But, despite the high level of trust, you should not rely only on Ichimoku - use the other indicators to kill the false signals.
This trading robot is one of the traditional indicators on the planet, so it is integrated into each trading platform by default. To install the latest version of Ichimoku, download it for free at the MTDownloads website.
How does this indicator look?
This technical instrument creates 5 lines of different colors; every of them has its purpose. Below we describe the algorithm for the calculation of each indicator and rules of their application. Under the description, we attached a picture of this working tool.
- Tenkan-sen (the red line) is calculated by dividing the sum of max and min values of the first period of time by two. This allows to view the dynamics of the average price of the specified time period;
- Kijun-sen (the blue line) - index, calculated analogically to the previous one, but it analyzes the prices of the second period;
- Chinkou Span (the green line) consists of the close prices of the candlestick. According to the formula, this indicator is placed further from the calculated value at the distance of the second analyzed period of time;
- Senkou Span A (the rose line) "draws" the middle of the distance between the above two lines. The indicator is moved forward for a distance equal to the second time period;
- Senkou Span B (the orange line) allows to see the position of the average prices of the asset during the third period. This line also has the higher position assigned to the distance of the second period of time, which is analyzed by Ichimoku.
Also, the chart still has the "Ichimoku cloud," located between the Senkou Span lines.
Application of the tool
Cloud is used if you need to determine the direction of the price for an asset you analyze and to identify the limits of support and resistance. If the price level is on the cloud, there is a sideways trend in the market. In this case, the Senkou Span B and the Senkou Span will work as resistance and support. When Tenkan-sen is deflected to the side, it also indicates minor price fluctuations. In such a situation, it makes no sense to enter the market.
If the price emerged above the cloud, it signals the rising prices of the asset and all the lines of Ichimoku in this case will be regarded as support. The top line right under the cloud is an option for the most conscious traders, and the other support levels will be further. If the tool shows a situation where Chinkou Span crosses the price upwards, it is a good signal to buy the asset. If it goes downwards, this is a good time to sell.
In the cloud, the main line is Kijun-sen - it determines the direction of the trend. If these two levels converge, the probability of imminent trend reversal is significant. Also, the Kijun-sen delivers clear signals at the intersection of the other indicators. When the Tenkan-sen interrupts the Kijun-sen bottom-up, it signals a good time to buy. If a similar crossing occurs downwards, it's time to sell the assets.
The considered line is very close to the Tenkan-sen because it responds well to the slightest fluctuations of the trend and is able to signal the imminent price reversal. While this indicator is moving in any direction, it means there is price movement in the market. When the line is in horizontal position, it is called flat.
Configuration of the tool
When using any trading tool, you must specify the correct configuration for it. In the case of Ichimoku, they are significant because they set up a cyclical trading platform.
Experimenting with his brainchild, Mr. Ichimoku identified the ideal settings for this indicator’s weekly charts: here cyclicality should be 9-26-52. The combination meets the 2nd month, half year, and a calendar year, respectively. If correctly these settings are properly applied, the indicator will be more efficient.
As practice shows, beginners are not very eager to test this tool because they believe it is too confusing. But experienced traders, which have spent a significant time studying Ichimoku, get a lot of money with its help. This robot is a huge range of opportunities, because it includes oscillators, trend indicators, and levels of support/resistance. Test Ichimoku today by downloading the latest version on the MTD website for free. Earn in Forex without any problems.