Chart Interpretation, Basics

- Strong signals - A strong buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A strong sell signa

- Normal signals - A normal buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A normal sell sig

- Weak signals - A weak buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A weak sell signal oc

- Overall strength - Strength is shown to be with the sellers if the Chikou Span is below the current price. Strength is shown to

- Support/resistance levels - Support and resistance levels are represented by the presence of the Kumo. If the price is enteri - Trends - Trends can be determined by simply looking at where the current price is in relation to the Kumo. If the price stays

Lets start by understanding what the name of this indicator means, in order to understand how it is used. The Japanese term

So, we can translate the full name Ichimoku Kinko Hyo to Instant view of the balance chart. This indicator was developed

The Ichimoku Kinko Hyo Technical Indicator is predefined to characterize the market Trend, Support and Resistance Levels, an

When defining the parameters of the indicator, four time intervals of different lengths are used: these lines, very similar to m It could sound a bit complicated at the beginning, but lets see the lines and what they represent:

1. 1.Tenkan-Sen, RED in our chart, shows the average price value during the first time interval defined as the sum of maxim 2. 2.Kijun-Sen shows the average price value during the second time interval or base line (BLUE) - (Highest high + lowest low 3. 3.Senkou Span A shows the middle of the distance between two previous lines shifted forward by the value of the secon 4. 4.Senkou Span B, GREY in our chart, shows the average price value during the third time interval shifted forward by the v

Finally, there is Chikou Span, or lagging span (GREEN), the most current closing price plotted 22 time periods behind. This gre

The distance between the two Senkou lines is hatched with another color and called "cloud" or KUMO. The two Senkou Span This means that:

If the price is above the cloud, its upper line forms the first support level, and the second line forms the second support leve If the price is below the cloud, the lower line forms the first resistance level, and the upper one forms the second level; If the price is between these lines, the market should be considered as non-trend, and then the cloud margins form the sup Ichimoku analysis is similar to Moving Average analysis. Buy and sell signals are given by cross-overs.

First we can say that the Kijun-sen BLUE is used as an indicator of the market movement. If the price is higher than this indica

The Tenkan-sen is used as an indicator of the market trend. If this line increases or decreases, the trend exists. When it goes h

However, the relative positions of the Kijun Sen and Tenkan Sen are also important: as we just said, basically a crossing of the

But we should also take care of the positions of price against the cloud and of the Tenkan Sen and Kijun Sen crossing the relat

Lets see an USD JPY weekly chart: price is breaking above the first resistance level, base of the cloud. Kijun Sen is about to cr

If the Chinkou Span line traverses the price chart in the bottom-up direction it is a signal to buy. If the Chinkou Span line trave

Interpreting the Chart

Strong signals - A strong buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A strong sell signa Normal signals - A normal buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A normal sell sig Weak signals - A weak buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A weak sell signal o Overall strength - Strength is shown to be with the sellers if the Chikou Span is below the current price. Strength is shown t Support/resistance levels - Support and resistance levels are represented by the presence of the Kumo. If the price is enter Trends - Trends can be determined by simply looking at where the current price is in relation to the Kumo. If the price stays Ichimoku rates the strength of bullish and bearish cross overs, too. A bullish crossover signal that occurs above the Kumo is a

Hi guys,

Since Ichimoku has recently caught a lot of attention in the Trader's circle and I couldnt find a reference on this site for this w

Few important points: Please note in advance that some of the concepts and interpretations you find here on this page will be quite unique and mig

I've a couple of reasons to look at Ichimoku differently, first that no system in world is perfect and we should try improving it

So please bear with me if you find some of the concepts defined below as different and / or unique and try giving it a chance.

Bit of History: The Ichimoku Cloud was originally called the 'Ichimoku Kinko Hyo.' Where Ichimoku means 'one glance, 'Kinko 'balance' and H Ichimoku Components:

Essentially made up of SIX major components, the Ichimoku offers a rich view of whats happening in the market. Following ar 1. The Tenkan-sen: (Conversion Line): is a nine-period moving average 2. The Kijun Sen: (Base Line): is a twenty six-period moving average

Now let's take a look at the most important component, the Ichimoku "cloud, which represents current and historical price a

3. Senkou Span A: The sum of the Tenkan Sen and the Kijun Sen divided by two. The calculation is then plotted 26 time period

4. Senkou Span B: The sum of the highest high and the lowest low divided by two. This calculation is taken over the past 44 ti Now the most important two components of Ichimoku:

5. Kumo cloud: The cloud is formed by using the Senkou Span A and Senkou Span B. Kumo offers a number of interesting feat 5.1. Support/resistance levels: Firstly, if todays candle is above the Cloud, the trend is for higher prices. The top of the Cloud

5.2. Cloud thickness: The thickness of the Cloud is important. The thicker the Cloud, the less likely it is that prices will manage

5.3. Crossover points: Many experts believe that this has no significance, my experience tells me that its the other way aroun

5.4. Trend reversals: Thin sections in the Cloud give us an idea of when the market is likely to change trend. Look ahead and s

6. Chikou Span: If you visit Youtube and search for Ichimoku, you will find a Video explaining how this system works. Good ex 6.1. Chikou Span is used in combination with todays candlestick: if Chikou Span is trading above the candlestick of 26 days ago, then todays market is said to be in a bullish long term phase if Chikou Span is trading below the candlestick of 26 days ago, then todays market is in a long term bearish phase. Same idea for Chikou Span itself and the Clouds: above the Cloud of 26 days ago, then today is bullish - and vice versa.

Few rigid ideas: If you do some homework and join some of the active forums on web, you will find few rigid ideas / concepts people have for

1. Ichimoku can only work on Daily Charts: Lets put it this way, Ichimoku doesnt know itself whether the Parameters you've p

2. 26/52 are the only settings that work with Ichimoku: Of course not dont take my word, but try starting with the Default se

3. Ichimoku does not work on Forex: In combination with the above points, people also claim that the Ichimoku does not wor

4. Ichimoku works only during the Trending market. Quite contradictory to the basic idea behind Ichimoku and especially its K

5. Ichimoku should not be combined with other Indicators. OK, and why is that ? Over the years, I've combined Ichimoku with several other indicators and have always found that it only adds a bit of extra he

The most basic method of trading the Ichimoku cloud is with a simple crossover. However, with six different components com

For the Ichimoku crossover strategy, the red Kijun-sen, a simple moving average with a 26-candle lookback period, serves as t When the Tenkan-sen crosses above the Kijun-sen, its a bullish indication and may signal a long entry. When the Tenkan-sen crosses beneath the Kijun-sen, its a bearish indication and may signal a short sell.

The word may in the two sentences above is important as no signal is automatic with the Ichimoku. Each must be analysed

The Kumo provides the strongest of these confirmations. The Kumo is the cloud itself, the meshed-in layer between the two S

For long entries, strong confirmation comes when the Tenkan-sen crosses above the Kijun-sen while above the Kumo. Thi If the crossover higher occurs while below the Kumo, the long entry signal is weaker, as the clouds strong resistance leve Crossovers that occur within the Kumo carry a neutral bias. For short entries, strong confirmation comes when the Tenkan-sen crosses beneath the Kijun-sen while beneath the Kumo If the crossover lower occurs while above the Kumo, the short entry signal is weaker, as the support level is in the way of

Finally, theres the Chikou span, which is the current candles closing price moved 26 candles into the past and displayed as a A long entry signal is stronger if it occurs beneath the Chikou span, and A short entry signal is stronger if it occurs above the Chikou span. The entry signal is complete with the significant candles close, e.g., the trade is placed on the first candle following the close

I have been a regular to babypips from quiet some time and have learnt a great deal from all of you.

I have been trading currencies for past 4 years. It has been a very rewarding experience for me emotionally as well as financia I would like to share with you all, a great trading system I have been using.

Kinko Hyo has always been a great visual guide to the market for the traders. I shall not go into the great details of ichimoku. You can use IchiWiki to see how the ichimoku is constructed. Here, I try to exp Success in trading comes to those, who are patient and wait for the right price at the right time to enter a position. The trading system, am explaing here requires you to wait for "right price at the right time"

Rewards are great, if you learn to be patient. This system can make you thousands of pips in a month. You just have to wait fo Success rate is about 90% (may be more, there are hardly any losing trades!!). I use this system only on Daily Charts. (May be it works on hourly but I haven't tried). So, here it goes: Pair: Any currency pair. Time Period: Daily (I use GMT for market open/close)

Tenkan Sen : Green Kijun Sen : Red Chikou Span (Lagging Line) : Purple Cloud : Blue Entry Signal: To SELL: Condition 1: Tenkan Sen below Kijun Sen. Condition 2: Chikou Span below the Price Line. Condition 3: Current Price below the Cloud. To BUY: Condition 1: Tenkan Sen above Kijun Sen. Condition 2: Chikou Span above the Price Line. Condition 3: Current Price above the Cloud. As soon as ALL 3 conditions are satisfied, enter into the position at the open of next candle. Use 2 lots to enter the position. EXIT: To exit, we use Chikou Span (the lagging line). Mark supports and resistance on the Chikou Span line, just as you would do for the price line. For LONG position: The support on Chikou Span right below the price you enter is your STOP LOSS level. The resistance on Chikou Span right above the price you enter is your TAKE PROFIT level. And vice versa, for SHORT position.

For example, in the chart attached, you can see 1.3985 as my profit target on EUR long position. And, 1.3600 is the stop loss l If your stop loss level is reached (which is very unlikwly), get out of your 2 lots. If you take profit level is reached, take out 1 lot and let the other lot run with a trailing stop loss.

As you can see the EUR chart attached, after giving the ENTRY signal at 1.3712, the price after hitting first target of 1.3985, w Well, this is my simple trading system Everyday, I scan all the currency pairs for this formation on daily charts and enter a position with above mentioned rules.

Only last week, I entered EUR/USD ; USD/CHF and an asian currency USD/SGD, all 3 pairs earning me thousands of pips in a m

I would appreciate any feedback or questions about this system Also any suggestions to improve the system are welcome.

I have also started updating all trades that I enter based on Ichimoku Trading System on MeetPips.com — Private Beta

en from below. A strong sell signal occurs when the opposite occurs. The signals must be above the Kumo.

-Sen from below. A normal sell signal occurs when the opposite occurs. The signals must be within the Kumo.

n from below. A weak sell signal occurs when the opposite occurs. The signals must be below the Kumo.

current price. Strength is shown to be with the buyers when the opposite is true.

of the Kumo. If the price is entering the Kumo from below, then the price is at a resistance level. If the price is falling into the Kumo, then

on to the Kumo. If the price stays below the Kumo, then there is a downward trend (bearish). Alternatively, if the price stays above the Ku

how it is used. The Japanese term Ichimoku means instant view or one glance, Kinko is the equivalent of equilibrium or balanc

art. This indicator was developed by Goichi Hosoda around 1969, and from that point forward Ichimoku Kinko Hyo has become a perma

Support and Resistance Levels, and to generate signals of buying and selling. Remember this indicator works best on weekly and daily ch

used: these lines, very similar to moving averages, are based upon high and low prices.

erval defined as the sum of maximum and minimum within this time, divided by two - (Highest high + lowest low) / 2, calculated over the p (BLUE) - (Highest high + lowest low) / 2, calculated over the past 26 time periods. orward by the value of the second time interval (ORANGE) - (Tenkan-Sen + Kijun-Sen) / 2, plotted 26 time periods ahead. e interval shifted forward by the value of the second time interval (Highest high + lowest low) / 2, calculated over the past 52 time period

d 22 time periods behind. This green Chinkou Span shows the closing price of the current candle shifted backwards by the value of the sec

" or KUMO. The two Senkou Span (leading) lines are pushed forward in time to represent past support and resistance similar in concept

ine forms the second support level; r one forms the second level; en the cloud margins form the support and resistance levels.

the price is higher than this indicator, the prices will probably continue to increase. When the price traverses this line, the further trend ch

es, the trend exists. When it goes horizontally, it means that the market has come into the channel.

ust said, basically a crossing of the Tenkan Sen above the Kijun Sen is bullish and a crossing of the Tenkan Sen below the Kijun Sen is beari

en and Kijun Sen crossing the relative position of todays price against that of 26 periods ago. That determines the strength of the signals.

the cloud. Kijun Sen is about to cross the Tenkan Sen, while Chikou Span is well above the 26 sessions ago price. A clear cut, plus a candle

buy. If the Chinkou Span line traverses the price chart in the top-down direction it is a signal to sell.

Sen from below. A strong sell signal occurs when the opposite occurs. The signals must be above the Kumo. -Sen from below. A normal sell signal occurs when the opposite occurs. The signals must be within the Kumo. n from below. A weak sell signal occurs when the opposite occurs. The signals must be below the Kumo. current price. Strength is shown to be with the buyers when the opposite is true. e of the Kumo. If the price is entering the Kumo from below, then the price is at a resistance level. If the price is falling into the Kumo, then ion to the Kumo. If the price stays below the Kumo, then there is a downward trend (bearish). Alternatively, if the price stays above the K

l that occurs above the Kumo is a very strong signal. Similarly, a bearish cross below the Kumo is considered strong.

d a reference on this site for this wonderful system I thought I'll take some time to explain everyone about Ichimoku.

page will be quite unique and might contradict with the usual Ichimoku concepts you have learned on the other web sites or read in the b

ct and we should try improving it by keeping the innovation alive. Secondly, I've been privileged to have worked with some of the most a unique and try giving it a chance.

'one glance, 'Kinko 'balance' and Hyo 'chart.' Thus the full translation could best be described as 'one glance balanced chart.' Originally de

pening in the market. Following are the key components:

sents current and historical price action. It behaves in much the same way as simple support and resistance by creating formative barriers

tion is then plotted 26 time periods ahead of the current price action.

ulation is taken over the past 44 time periods and is plotted 22 periods ahead.

offers a number of interesting features, such as:

igher prices. The top of the Cloud is the first level of support and the bottom is the second level of support. From experience, I have seen

likely it is that prices will manage a sustained break through it. The thinner the Cloud, and a break through has a much better chance. So,

s me that its the other way around. The Kumo (borders) crossover shows the Major Shift in Trends.

o change trend. Look ahead and see when, and at what price, it gets very thin. Similarly, if the Cloud is getting fatter and fatter, the chanc

g how this system works. Good explanation in my opinion, however one major problem there. The guy explains all the above components

to be in a bullish long term phase; conversely, long term bearish phase. ay is bullish - and vice versa.

d ideas / concepts people have formed, I tend to disagree (based on personal experiences) with the following in particular:

whether the Parameters you've provided are daily numbers or a shorter timeframe. Since the price moves in waves and follow certain p

but try starting with the Default settings first and then try different combinations based on the Timeframe of your choice. You'll find that o

m that the Ichimoku does not work well in the Forex market as it was originally designed for Japanese market which works 26 days in a m

ehind Ichimoku and especially its Kumo cloud, it actually helps you to detect the Trends and their strengths

d that it only adds a bit of extra help. So try it with other indicators and see what suits you most.

with six different components comprising this technical indicator, stock traders must realize that simple is a relative term and more ana

andle lookback period, serves as the signal line and the blue Tenkan-sen (SMA-9) serves as the trigger:

al a long entry. gnal a short sell.

Ichimoku. Each must be analysed within the context of the indicators other components, which provide a strength level for the crossove

meshed-in layer between the two Senkou span lines. It serves as a dynamic and major support-resistance level, fully capable of stopping a

un-sen while above the Kumo. This means that the price action wont have to break through the Kumos resistance to continue its move h the clouds strong resistance level is in the price actions path.

Kijun-sen while beneath the Kumo, as the price action wont have to breach that strong support level to continue its move lower. the support level is in the way of the move.

s into the past and displayed as a lime green line. It serves as the trends barometre and a sort of magnet which draws the price action co

he first candle following the close of the candle where the crossover takes place

me emotionally as well as financially.

ku is constructed. Here, I try to explain the system I have been using with great success for past 2 years.

ime to enter a position.

n a month. You just have to wait for the right time.

Use 2 lots to enter the position.

P LOSS level.

tion. And, 1.3600 is the stop loss level

er hitting first target of 1.3985, went as high as 1.4700

with above mentioned rules.

rning me thousands of pips in a matter of 2 days.

etPips.com — Private Beta and you can find me there with the user name Dealing Roo

price is falling into the Kumo, then there is a support level.

ely, if the price stays above the Kumo, then there is an upward trend (bullish).

valent of equilibrium or balance and Hyo means chart.

u Kinko Hyo has become a permanent feature in Japanese trading rooms.

works best on weekly and daily charts, so it's better for long term analysis.

west low) / 2, calculated over the past nine time periods.

me periods ahead. ated over the past 52 time periods. And Plots 26 periods ahead.

backwards by the value of the second time interval.

and resistance similar in concept to the idea that once established, support will continue to provide support until broken when it becom

erses this line, the further trend changing is possible. Also, the crosses between the Kijun-sen BLUE and the Tenkan Sen RED cross overs a

n Sen below the Kijun Sen is bearish.

mines the strength of the signals. The Chikou Span (lagging span) is todays price moved back 26 periods. If the Chikou Span (todays price

go price. A clear cut, plus a candle opening inside the cloud, will give a bullish signal, though not the strongest one, as 98.75 level, roof of t

price is falling into the Kumo, then there is a support level. vely, if the price stays above the Kumo, then there is an upward trend (bullish).

ered strong.

ut Ichimoku.

he other web sites or read in the books.

e worked with some of the most advanced Ichimoku experts who happen to be Japanese themselves. All these factors have encouraged m

nce balanced chart.' Originally developed by Goichi Hosada pre WWII, a newspaper journalist (published in 1969) who wanted to develop

nce by creating formative barriers. The last two components of the Ichimoku application are:

ort. From experience, I have seen that these really do often work, but one has to give them a little leeway. Normally, I would also wait unt

ugh has a much better chance. So, Cloud is Cloud regardless of whether Span A or Span B is on top; the thickness is what matters.

etting fatter and fatter, the chance of a reversal in trend lessens looking out into the future. It gives dates (Id say three or four days arou

xplains all the above components and tells you that he has not drawn Chikou Span on this chart since its of no value at all. Its actually qui

owing in particular:

ves in waves and follow certain patterns there is no reason why Ichimoku cant help you in shorter timeframes

me of your choice. You'll find that one combination will work as the best in one timeframe while not so great in the other. So my personal

market which works 26 days in a month unlike the forex market which works on a 24 hours model. I would say that it works as great on for

e is a relative term and more analysis will be required to discern the best trading set-ups.

e a strength level for the crossover and confirmation or otherwise for the market entry.

e level, fully capable of stopping a trending move before it begins, and therefore its location relative to the crossover is significant: resistance to continue its move higher.

continue its move lower.

et which draws the price action converging toward itself, and therefore:

pport until broken when it becomes resistance. The colored area between the two Senkou , the cloud, not only defines the trend but ac

the Tenkan Sen RED cross overs are signs of further continuation. A bullish signal is issued when the Tenkan Sen RED crosses Kijun Sen BLU

s. If the Chikou Span (todays price) is below that of 26 periods ago and a sell signal occurs, it is a stronger signal that it had been above th

ngest one, as 98.75 level, roof of the cloud, which should act as strong resistance in the pair or probable target.

these factors have encouraged me to think out of the box.

d in 1969) who wanted to develop an Uber-indicator that could provide the trader with various levels of support/resistance, entry/exit po

ay. Normally, I would also wait until the end of the day to see whether the closing price is below the Cloud, before even beginning to cons

hickness is what matters.

es (Id say three or four days around the central

s of no value at all. Its actually quite contradictory as this particular happens to be one of the most important element as it (in combinatio

reat in the other. So my personal advise is to try out as many settings and timeframes as possible

d say that it works as great on forex as it works on any other market, the reason is that it actually works on Price and not on the market it

he crossover is significant:

, not only defines the trend but acts as support and resistance for price. A very basic precept is: if price is above the cloud then the trend i

kan Sen RED crosses Kijun Sen BLUE from below. Conversely, a bearish signal is given when Tenkan Sen crosses Kijun Sen from above.

r signal that it had been above the close of 26 periods ago. Equally the opposite is true for buy signals.

support/resistance, entry/exit points, direction of the trend, and strength of the signal.

ud, before even beginning to consider whether the trend has reversed. The opposite is the case when candles are below the Cloud, with t

rtant element as it (in combination with Kumo cloud) basically helps us to determine the strenght of signals. Here is what it does:

on Price and not on the market itself. Any financial product which follows the price movement could be used with Ichimoku (just like any

s above the cloud then the trend is higher and vice versa.

crosses Kijun Sen from above.

andles are below the Cloud, with this becoming the area of resistance. Very often the market seems to move through the first support/res

nals. Here is what it does:

e used with Ichimoku (just like any other indicator)

move through the first support/resistance level and fails somewhere in the middle of the Cloud. When this happens we watch the shape o

his happens we watch the shape of the daily candlesticks to see if they give a reversal signal.