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Ichimoku Kinko Hyo

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The Ichimoku Kinko Hyo, or Ichimoku for short, is a technical indicator that is used to gauge momentum along with future areas of support and resistance. The all-in-one technical indicator is comprised of 5 lines called the tenkan-sen, kijun-sen, senkou span A, senkou span B and chikou span.

The Ichimoku Kinko Hyo indicator was originally developed by a Japanese newspaper writer to mix various technical strategies into one indicator that would be easily implemented and interpreted. In Japanese, ichimoku translates to one look, meaning traders only have to take one look at the chart to determine momentum, support, and resistance.

Ichimoku may look very complicated to novice traders that haven’t seen it before, but the complexity quickly disappears with an understanding of what the various lines mean and why they are used.

The Ichimoku indicator is best used in conjunction with other forms of technical analysis despite its goal of being an all-in-one indicator.

There are five major elements to the Ichimoku indicator:

  • Tenkan-sen: The tenkan-sen, or conversion line, is calculated by adding the highest high and the highest low over the past nine periods and then dividing the result by two. The resulting line represents a key support and resistance level, as well as a signal line for reversals.
  • Kijun-sen: The kijun-sen, or base line, is calculated by adding the highest high and the lowest low over the past 26 periods and dividing the result by two. The resulting line represents a key support and resistance level, a confirmation of a trend change, and may be used as a trailing stop-loss point.
  • Senkou Span A: The senkou span A, or leading span A, is calculated by adding the tenkan-sen and therefore the kijun-sen, dividing the result by two, then plotting the result 26 periods ahead. The resulting line forms one fringe of the kumo – or cloud – that is wont to identify future areas of support and resistance.
  • Senkou Span B: The senkou span B, or leading span B, is calculated by adding the highest high and the lowest low over the past 52 periods, dividing it by two, and then plotting the result 26 periods ahead. The resulting line forms the opposite fringe of the kumo that is wont to identify future areas of support and resistance.
  • Chikou Span: The chikou span, or lagging span, is that the current period’s price plotted 26 days back on the chart. This line is employed to point out possible areas of support and resistance.

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