Developed in the 30s and published in 1968 by Goichi Hosoda, the Ichimoku Kinko Hyo technique is a trading method enabling one to follow and predict market trends.
In this indicator we find 5 main elements:
- Chikou Span or Lagging Span: Price line shifted by x periods.
- Kijun-Sen: Trend line.
- Senkou Span A (SSA): Main extension A.
- Senkou Span B (SSB): Mai extension B.
- Tenkan-Sen: Signal line.
Kijun-Sen = (Highest Point + Lowest Point)/2 (on P1 last periods)
Tenkan-Sen = (Highest Point + Lowest Point)/2 (on P2 last periods)
Chikou Span = Delayed closing of P1 periods
Senkou Span A = (Kijun-Sen + Tenkan-Sen)/2 (on P1 last periods)
Senkou Span B = (Highest Point + Lowest Point)/2 (on 2*P1 last periods, extended over P1 period)
P1 : medium-term period, generally 26.
P2 : short term period, generally 9.
- Buying Signal: The Tenkan-Sen crosses the trend line in an up-trend. Reinforced if Chikou-Span is above the close price.
- Selling Signal: The Tenkan-Sen crosses the trend line in a down-trend. Reinforced if Chikou-Span is under the close price.
- Bullish trend: The Kijun-Sen breaks the course upward.
- Bearish trend: The Kijun-Sen breaks the course downward.
- Cloud (gap between Senkou Span A and B): serves as a support or resistance.
The Tenkan-Sen and Kijun-Sen are also elements of support and resistance. Furthermore, the Chikou Span can also find support or resistance on every element it crosses, even price candles.