Ichimoku Indicator

Ichimoku Kinko Hyo in Japanese means “one glance at the balance chart”. The Ichimoku indicator unites various approaches to forecasting price movements and combines a series of indicators. It is employed to indicate a market trend, determine support and resistance levels, and produce sell and buy signals. The Ichimoku indicator was developed by analyst Goichi Hosoda (Ichimoku Sanjin) in the 1930s with an aim to predict the behavior of the Nikkei stock index on weekly and daily timeframes. 

 

Tenkan-sen (a turning line) is painted red in the chart. It displays the average price value during the first time interval defined as the sum of high and low within this timeframe, divided by two. It shows the direction of a short-term trend. 

 

Kijun-sen (a standard or base line) is blue. It shows the average price value during the second time interval. Kijun-sen is used to indicate a market trend. When the price line is above the Kijun-sen, the market is bullish. When the price line is below the Kijun-sen, the market is bearish. 

 

Senkou A (the first leading line) shows the middle of the distance between two previous lines shifted forwards by the value of the second time interval. 

 

Senkou B (the second leading line) shows the average price value during the third time interval shifted forwards by the value of the second time interval. 

 

The Kumo cloud is the crosshatched space between the Senkou Span A and B. Prices within the Kumo cloud are signs of a flat market. In this case the top and bottom lines of the cloud act as support and resistance. If the price is above Kumo, the top line of the cloud acts as the first support, while the bottom line acts as the second support. When the price is below Kumo, the bottom line of the cloud appears to be the nearest resistance, and the top line serves as the second resistance. 

 

The Chikou Span (a lagging line) is based on current closing prices. It shows the closing price shifted backward by the value of the second time interval. If the Chikou Span crosses the price chart from the bottom upwards, it is a signal to buy. A sell signal occurs when it crosses the price chart in the top-down direction. Tenkan, Kijun, and Senkou lines employed all together function as the MACD indicator. The Chikou Span is similar to Momentum, a standard MetaTrader4 indicator.

 

 

When Tenkan-sen crosses Kijun-sen from the bottom upwards, it is a signal to open a long position. If it crosses Kijun-sen from top downwards, it is a signal to go short. If Senkou A and Senkou B cross each other in the bottom-up direction, it is a signal to buy. If they cross each other in the opposite direction, it is a signal to sell. The indicator generates a buy signal when the price chart is crossed from the bottom upwards. Vice versa, a sell signal is generated when the Ichimoku lines cross the price chart from top downwards. If the Chikou Span crosses the price chart in the bottom-up direction, it is a signal to buy. If the Chikou Span crosses the price chart in the top-down direction, it is a signal to sell.