Ichimoku Indicator

Ichimoku Kinko Hyo Indicator – is a trading technical indicator elaborated in 1930 by Japanese analyst Goichi Hosoda under alias name Ichimoku Sanjin. He monitored movement of Japanese index Nikkei. Ichimoku Indicator is purposed to figure out what Forex trend is, to find resistance and support line and  generate purchase/ sell alerts.

The first publication about result of Ichimoku indicator's performance was made in 1960. For more than 30 years Mr. Goichi Hosoda had been improving his indicator.

Justification of the theory

Ichimoku indicator is supplied with the lines called Tenkan, Senkou and Kijun that are analogues to moving averages and can be interpreted separately as moving averages or together as MACD indicator.

Chinkou line is virtually an analogue to Momentum indicator.

This indicator represents five lines put on price chart with painted area between two of those lines as it is shown on the picture.

Time intervals

To build Ichimoku indicator, you need to specify three time intervals with different duration:

Ichimoku Sanjin proved in practice that specified intervals are the best for Nikkei index for weekly bars (candles)

Some analysts doubted that those relations are optimum for other markets and time frames, but upon that a trader has a chance to select intervals of better quality according to preferred trading parameters.

Lines

Tenkan (turning line) – a short trend's line, its values are equal to the sum amount of highest and lowest prices for a hort interval. The higher steepness of this line is, the stronger trend is expressed.

Kijun (line of standard) – an average value between highest and lowest points for an average time interval.

Senkou A (upstream) – an average value between Kijun and Tenkan shifted forward for an average time interval.

Senkou B (upstream) – an average value between highest and lowest points for a long time interval shifted forward for an average time interval.

Chinkou – shifted back, for an average time interval.

Kumo (cloud) – area between Senkou A and B that shows market volatility.