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How to trade with Ichimoku Kinko Hyo indicator


Today we will learn how to use the Ichimoku Kinko Hyo indicator. It was created in the late 1930s by the prominent Japanese journalist Goichi Hosoda and used to be known as Ichimoku Sanjin which can be translated as “what a man in the mountain sees.” By looking at the present components of the Ichimoku indicator we may conclude that this man saw quite a lot of things – baroque lines, quilted clouds, spans. So, our task for today is to peer into these elements and learn to recognize their signals.
Kijun-Sen is a major component of the Ichimoku Kinko Hyo indicator. This is a confirmation line (a support/resistance line) that can help to identify the future price movement. If quotes are located below the line (usually it is painted in blue color), they may move downwards. Conversely, if prices are above the Kijun-sen, they may continue to rise.
Tenkan-sen (usually it’s red)
It is a signal line that can be used as a minor support/resistance. If the line moves up or down, it indicates that the market is trending. If it’s flat, the market is ranging; prices are moving sidelines.
Chikou span (green line)
Sometimes it’s called as the lagging span. It is used as a support/resistance. If the line crosses the price in the down-up direction – it’s a buy signal. If the green line crosses the price from the top -down, you may consider as a sell signal.
Kumo – the Ichimoku cloud
It is the space between Senkou span A and Senkou span B. It is usually used for the identification of the current and potential support/resistance points. The cloud can gain in weight or get thin. Thinner clouds offer weak support and resistance, the quotes can easily break through such “kumos.” Also, you may use the clouds for identification of the uptrend or downtrend, potential reversals. Generally, markets are “bullish” if Senkou span A is higher than Senkou span B. the reverse position of the spans tells us that the market is “bearish”. Traders are looking for the kumo’s swings to identify the reversals of the trend.

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