Ichimoku Kinko Hyo (IKH) is a technical indicator that was published over 30 years ago in Japan. It was created and developed by Japanese journals named Goichi Hosada. In Japanese Ichimoku means one look, and Kinko translated means balance or equilibrium. The Ichimoku Kinko Hyo measures market momentum and trend and besides it outlines levels of support and resistance. The purpose of this indicator is to help traders to measure asset’s trend, momentum and support and resistance points, excluding the need of any other technical indicator.
Ichimoku Kinko Hyo is most optimum on longer term timeframes, such as the daily and weekly. The Ichimoku indicator has five lines.The calculation of four of these lines exacts taking only the midpoints of previous highs and lows, as it is with moving average studies.
– Tenkan-Sen = Conversion Line = (Highest High + Lowest Low) / 2, for the past 9 periods (Blue Line)
– Kijun-Sen = Base Line = (Highest High + Lowest Low) / 2, for the past 26 periods (Red Line)
– Chikou Span = Lagging Span = Today’s closing price plotted 26 periods behind (Light Blue Line)
– Senkou Span A = Leading Span A = (Tenkan-Sen + Kijun-Sen) / 2, plotted 26 periods ahead (Green)
– Senkou Span B = Leading Span B = (Highest High + Lowest Low) / 2, for the past 52 periods, plotted 26 periods ahead (Yellow)
The area between Senkou Span A and B called the Kumo, which means cloud. The simplest way to work with the Ichimoku Kinko Hyo is when price crosses the cloud. If price crosses the cloud downwards, it is a short signal. Analogically, when price crosses the cloud upwards, it is a long signal and a sign to buy. This is a similar way of work with moving average studies.