Ichimoku Kinko Hyo or Ichimoku Cloud Indicator : NobleTrading Blog

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.