Ichimoku Kinko Hyo: A Technical Analysis Equilibrium Chart
Posted by Edward Dy on July 5th, 2008
Photo Credit: AloneInThe House
In technical analysis, Ichimoku Kinko Hyo is utilized as an equilibrium chart. The chart was created by a Japanese named Goichi Hosada. The name of the chart roughly translates to “equilibrium at a glance,” aptly describing its function as it provides information regarding the equilibrium behavior of a particular asset by taking only a single glance at the chart. Although the chart did not become popular in the West until the 1990s, it has been in use in Japan since 1968.
There are five lines in Ichimoku Kinko Hyo, namely:
- Tenkan-sen - this averages the highest high and lowest low and is calculation is arrived at in a fairly short time period, i.e. 7 to 9.
- Kijun-sen - this utilizes a similar equation; however this is calculated over 22 periods;
- Chikou Span plots the current closing price a full twenty-two periods behind.
- Senkou Span A averages Tenkan-sen and Kijun-sen, and a 26 periods plot ahead.
- Senkou Span B takes the highest high and lowest low and averages them over the last 44 periods. This is plotted ahead by 22 periods. The space between Senkou Spans A and B is known as the Kumo.
Traders utilize Ichimoku Kinko Hyo to get different signals for market behavior, judging by the interaction of the chart’s lines with the Kumo. By reason of the chart’s comprehensiveness, traders rely on it, being a powerful technical analysis tool.
However, as a forex trader, be warned that its use in forex has some drawbacks, since the market never closes - no close prices therefore are generated - and renders the Chikou span difficult to plot under the situation. You need therefore to exercise good judgment in deciding from which time periods the chart should be created as well as which price should be chosen as close price for the market.
TradingSolutions:Financial analysis and investment software that combines technical analysis with neural network and genetic algorithms.
Commercial Forex Trading Secrets Revealed
Play to Win $50,000 - Fantasy Stock Trading Game
Forex Trading Courses