Freaking cold sunday in here so I looked something new for a while.
Goichi Hosoda developed the Ichimoku Kinko Hyo charting technique in 1968.
I´ve heard in recent year from many sourches and they do well with Ichimoku Charts with various of markets. To be a bit curious I finally added them to my metastock and metaframe 4.0. I think will add these to my arsenal tool, even I would like to keep technical tools in very minimal range. If you have any state-of-art platform it´s easy to program alert signals without need to monitor it all the time.
It´s actually pretty simple method, chart appears to look a bit weird at very first sight and took a while before learned to read it. After run some robot performance tests between the timeframes, result were pretty impressive.
The technique gives an easy gate to determine buy and sell signals, support and resistance levels, trends, and signal strength. The charting method is not without its drawbacks, such as its need for empirical decision making and time period definitions and its indications to make high frequency trades.
1. Tenkan-Sen, or conversion line (red) – (Highest high + lowest low) / 2, calculated over the past seven to eight time periods.
2. Kijun-Sen, or base line (maroon) – (Highest high + lowest low) / 2, calculated over the past 22 time periods.
3. Chikou Span, or lagging span (pink)- The most current closing price plotted 22 time periods behind (optional).
4. Senkou Span A (green)- (Tenkan-Sen + Kijun-Sen) / 2, plotted 26 time periods ahead.
5. Senkou Span B – (blue) (Highest high + lowest low) / 2, calculated over the past 44 time periods. Plot 22 periods ahead.
The Ichimoku chart can be used to determine a variety of things. Here is a list of most basic signals commonly used;
Strong signals – A strong buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A strong sell signal occurs when the opposite occurs. The signals must be above the Kumo.
Normal signals – A normal buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A normal sell signal occurs when the opposite occurs. The signals must be within the Kumo.
Weak signals – A weak buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A weak sell signal occurs when the opposite occurs. The signals must be below the Kumo.
Overall strength – Strength is shown to be with the sellers if the Chikou Span is below the current price. Strength is shown to be with the buyers when the opposite is true.
Support/resistance levels – Support and resistance levels are represented by the presence of the Kumo. If the price is entering the Kumo from below, then the price is at a resistance level. If the price is falling into the Kumo, then there is a support level.
Trends – Trends can be determined by simply looking at where the current price is in relation to the Kumo. If the price stays below the Kumo, then there is a downward trend (bearish). Alternatively, if the price stays above the Kumo, then there is an upward trend (bullish).
“Ichimoku” is a Japanese word that means “one look.” This charting technique was created by a Japanese newspaper writer. It does look very complicated when a trader sees the indicator for the first time, but don’t hesitate to give this indicator a try because the complexity quickly disappears once you gain an understanding of what the various lines mean and why they are used.
