About
Ichimoku – A Japanese word meaning “one look.”
As oppose to many Technical Analysis indicators that are developed by quant statisticnas or mathematicians, the Ichimoku indicator first appeared in 1968 by newspaper writer by the name of Goichi Hosoda. He along with his team ran some calculations and tumbled onto this method.
From there, the adaptation of Ichimoku was exponential across beginners and professionals. The Ichimoku offers a view on price action and higher probability trading.
Novice traders are intimidated by the Ichimoku clouds’ appearance alone, the wealth of information it reveals is really quite simple to understand – once you know what to look for.
The Ichimoku indicator is used to measure medium time frame momentum along with projected areas of support and resistance. The standard Ichimoku is comprised of five lines:
Tenkan-Sen
This line is typically constructed by only using the highs and lows for the last seven to nine periods. The resulting line is interpreted in the same manner as a short-term moving average.
Kijun-Sen
This line is created exactly the same as the Tenkan-sen except with more extended time frames. Many traders use the crossing of the Kijun and Tenkan as points of entry and exit.
Senkou Span A and Senkou Span B (The Cloud)
The cloud is made up of space between the Senkou Span A and Senkou Span B. Senkou Span A is calculated by subtracting : (Tenkan – Kijun)/2 and the Senkou Span B is calculated by (Highest High- Lowest Low)/2 over typically 52 periods.
Chikou Span
The Chikou span is created by plotting recent price movement 26 periods behind the latest closing price. The trend is determined based on where the closing price is relative to the Chikou Span. The trend is up when the Chikou span is above the closing prices and down when the indicator is below the closing price. Many traders use the crossing of price above and below this span as an indication of imminent price change.
The genius of Ichimoku is that by plotting these lines on a chart provides simultaneous valuable information about momentum, support, and resistance, to make profitable entries and exits.
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