Ichimoku Kinko Hyo
19 hours agoIchimoku Kinko Hyo is a trend-following indicator that may appear complex at first glance, but it is actually quite straightforward. This Japanese indicator was designed to function independently, providing insights into current trends, identifying support and resistance levels, and signaling potential trend reversals.
The term Ichimoku translates to “one glance,” reflecting its purpose as a quick visual tool for assessing price behavior on a chart. Its full name, Ichimoku Kinko Hyo, means “equilibrium chart at a glance.” Developed by Goichi Hosoda and introduced in 1968, the chart did not gain traction in Western markets until the 1990s.
Ichimoku Kinko Hyo consists of five lines. The Tenkan-sen line calculates the average of the highest high and lowest low over a short timeframe of seven to nine periods. The Kijun-sen line uses the same formula but spans twenty-two periods. The Chikou Span represents the current closing price, plotted twenty-two periods in the past. Senkou Span A averages the Tenkan-sen and Kijun-sen, plotted twenty-six periods ahead, while Senkou Span B averages the highest high and lowest low over the last fifty-six periods, also plotted twenty-two periods ahead. The Kumo refers to the area between Senkou Spans A and B.
Traders utilize Ichimoku Kinko Hyo to generate various signals regarding market behavior, based on how the lines interact with the Kumo. Due to the chart's comprehensive nature, it is regarded as a powerful tool for technical analysis.
However, forex traders should be mindful of the chart's limitations in foreign exchange markets. Since these markets operate continuously, there are no definitive closing prices, making it ambiguous how to accurately plot the Chikou Span. Therefore, careful consideration is necessary when selecting the time periods for generating the chart and determining which price to use as the closing price in forex markets.
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