Trade Gold Trading

Ichimoku Kinko Hyo Indicator

Ichimoku Kinko Hyo is a Japanese charting technique that was created 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 and help the trader to figure out the most suitable time to enter or exit the market.

Calculation

This indicator consists of five lines drawn using the midpoints of previous highs and lows. Five lines are calculated as follows:

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

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

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

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

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

Kumo: Cloud: area between the Senkou Span A and B

Technical Analysis and How to Generate Signals

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

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

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

Analysis in CFDs Trading

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

Very strong buy trade signal.

Bearish crossover signal occurs below Kumo (clouds),

Very strong sell cfds trade signal.

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

A bullish crossover that occurs below the clouds is considered a weak buy cfd signal while a bearish crossover that occurs above the clouds is considered a weak sell cfds trade signal.

Support and Resistance Areas

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

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

The Chikou Span or Lagging Span is also used to determine the strength of the buy or sell cfds trade signal.

• If the Chikou Span is below the closing price of the last 26 periods ago and a sell short signal is given, then the strength of the cfd trend is downwards, otherwise the signal is considered to be a weak sell cfds trade signal.
• If there is a bullish signal and the Chikou Span is above the price of the last 26 periods ago, then the strength of the cfd trend is to the upside, otherwise it is considered to be a weak buy trade signal.