The Ichimoku Kinko Hyo charting technique was developed by Japanese analyst Hosoda, who wrote under the name of “Ichimoku Sanjin”.
- The Ichimoku Kinko Hyo indicator consists of five lines:
- Tenkan-sen – the average price level, (High+Low)/2, calculated over the first time period;
- Kijun-sen – the average price level over the second time period;
- Senkou Span A / Up Kumo – midway between Tenkan-sen and Kijun-sen, shifted forward for the length equal to the second time period;
- Senkou Span B / Down Kumo – the average price level over the third time period, shifted forward for the length equal to the second time period.
- Chinkou Span – current bar close, shifted backward for the length equal to the second time period.
- The “cloud” known as the “Kumo”, is the space between “Senkou Span A” and “Senkou Span B”.
- If the price stays above the cloud then there is an upward trend.
- If it stays below the cloud then there is a downward trend.
- If the price is within the cloud then the market is flat.
- If Tenkan-sen line moves sideways then it is a signal for a flat market.
In order to add Ichimoku Kinko Hyo indicator in MetaTrader 4, use “Insert -> Indicators-> Oscillators-> Ichimoku Kinko Hyo menu sequence.
Ichimoku Kinko Hyo Indicator signals
When the price exits the cloud downward it is a sell signal, upward – buy signal:
- Exit from the cloud
- The price ranges before and after the cloud are often the same.
- When the price and Chinkou Span (green line) intersect it is a signal to make a deal.
- If Chinkou Span crosses the price line from below it is a buy signal, if it crosses from above it is a sell signal:
Price and Chinkou Span Cross
If Tenkan-sen (red line) crosses Kijun-sen (blue line) from above it is a sell signal, and vice versa:
Tenkan-sen and Kijun-sen Cross
When the price is inside the cloud it tends to move in the direction of Tenkan-sen line (red line). If the Tenkan-sen line is directed downwards then the price tends to move to the lower edge of the cloud and vice versa:
