Welcome! Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading. Obviously, the task is not easy as the statistics claim that only 5% traders win in forex trading. If you are determined, serious,and hard working, you can surely be included in the group of winners.

FOREX TECHNICAL ANALYSIS WITH ICHIMOKU KINKO HYO

Ichimoku Kinko Hyo technical indicator was developed by Goichi Hosoda, a news paper writer in Tokyo. "Ichimoku" is a Japanese word which means "one look ." When I was first introduced with this indicator, I found it very difficult to apply it in trading forex, but later I found it very useful when I understood the functions of its components. The indicator has four components that are explained below. I ignored the calculation of the components of this indicator to keep this post simple, and just focused on the interpretation of this indicator.

Source:thumbs.dreamstime.com, metatrader4.com
  • Kijun Sen (blue line): The blue line in the indicator is called Kijun Sen, standard line or base line.
  • Tenkan Sen (red line): The red line in the indicator is called Tenkan Sen, also called turning line. 
  • Chikou Span (green line): The green line is called the Chikou Span, the lagging line.
  • Senkou Span (orange line and pink line): The Senkou Span is formed with two lines, which are calculated on different periods. The Senkou Spans together form Ichimoku Cloud. 
Ichimoku Kinko Hyo is not a single indicator rather a set of indicators. The indicator can be very suitable for the traders who trade targeting 5-20 candlesticks. This indicator can help to understand the trend of the market. If you rely completely on scalping, this indicator can be used to know the direction of the market, and to find the entry and exit signals.

Source: metatrader4.com

The Ichimoku Cloud, which is formed with  two Senku Spans, represent the support and resistance levels. If the price is above the cloud, it means that the market may remain bullish for certain periods. In other way, if the price is below the cloud, it means that the market may remain bearish for certain periods. The color of the cloud also signals about the trend, for example if the color turns into orange from pink, it indicates an up trend. And if the color turns into pink from orange, it indicates a down trend. Another important point is that when the market is above the cloud, first  Senku Span is the first support level and the second Senku Span is the second support level. Similarly, when the market is below the cloud, first  Senku Span is the first resistance level and the second Senku Span is the second resistance level. 

Source: metatrader4.com
Chikou Span can be very effective to find entry and exit signals. If the Chikou Span crosses the price from bottom, it is a buy signal, and if it crosses the price from top, it is a sell signal. A buy order can be closed when a sell signal is found, and a sell order can be closed when a buy signal is found.

Tenkan Sen explains whether the market is trending or ranging. When the Tenkan Sen is moving up and down, it indicates a trending market, and when the Tenkan Sen is moving horizontally, it indicates a ranging market.

Kijun Sen helps to predict the future price movement. If the price is higher than the Kijun Sen, it indicates that the price may climb higher, and if the price is lower than the Kijun Sen, it indicates that the price may drop lower.

So with this indicator, you can find:
  • Entry and exit signals.
  • Direction of the trends.
  • Future price movements.
  • Trending and ranging markets.
Almost every traders find this indicator hard to apply in trading, but when they explore the effectiveness of this versatile technical indicator, they draw a sweet smile in face and say "It is not that hard." 

This indicator can be applied on the 30m,1hr, 4hr and 1d charts, depending on your trading strategy and objective. If you want to play with this indicator, changing the periods, I will suggest you to be introduced with the formulas applied to draw this components of this indicator.

You can drop comments below to start a discussion.

1 comment :

  1. I have been to many sites but this is perhaps one of the most precise information given in simple terms and language for benefitting a beginner. Very nice work

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