Ichimoku Kinko Hyo or Ichimoku Cloud Trading Indicator Tools

Tuesday, July 29, 2008

Ichimoku Kinko Hyo or Ichimoku Cloud Indicator

Ichimoku Kinko Hyo (One Glance Balanced Chart) or Ichimoku Cloud is a technical analysis tool for finding support and resistance levels, direction of trends, strength of trends, and entry and exit points. The indicator was first developed by a Japanese journalist, Goichi Hosoda, in 1968-69. Ichimoku cloud is becoming increasingly popular among traders trading equities, futures and forex currencies.

Ichimoku Kinko Hyo combines 3 technical indicators in one chart. It has 5 lines of different color; actually this abundance of lines makes this indicator look complex for novice traders.

Tenken Sen (TL): Indicates direction of trend (Sen means line). Calculated as sum of highest high (HH) and lowest low (LL) of last 7 or 8 trading periods divided by 2.
Kijun Sen (ST): Another trend indicator calculated just like Tenken Sen but of last 22 trading sessions.
Senkou Span A (S1): Is the support/resistance level. Calculated as sum of Tenken Sen and Kijun Sen sessions divided by two; plotted 26 time periods ahead of current price.
Senkou Span B (S2): Is another support/resistance level. Calculated as sum of HH and LL of last 44 sessions divided by two; plotted 22 time periods ahead of current price.
Chikou Span (DL): Is the market sentiment or strength of trend. Is a comparison of current closing price with the closing price 22 periods ago.