Forex Indicators_9. Forex Ichimoku Kinko Hyo

Lesson 9: Forex Ichimoku Kinko Hyo

Ichimoku; a trend direction momentum indicator which gives out trading signals as
to the support and resistance levels. There are four main components to
Ichimoku...they’re known as the Tenkan-Sen Line, the Kijun-Sen Line, the
Chikou Span and the Kumo Cloud.
As with most similar indicators, you look for lying crossovers to identify your entries.
So, for a long entry, you are looking for the Tenkan-Sen Line to cross above the
Kijun-Sen Line. For a short entry, you are looking for the Tenkan-Sen Line to cross
below the Kijun-Sen Line.
Our focus, however, is on the long entries under conditions where the price is more
than the Kumo Cloud. As for short entries, concentrate on the price when it is is
trading lower than the Kumo Coud. In the meantime, ignore any crossover that
occurs when the price it trading inside the Kumo Cloud - as it means the price in
range.
Now onto the Chikou Span - which is the the price action plotted against a few
periods from the past; by default, many people make use of 26 days in advance but
you can experiment with this setting yourself.
The Chikou Span is used to filter out the cross-over entries: in the case of valid long
entries, the Chikou Span should be above the Kumo Cloud; for short entries, it
should be below the Kumo Cloud.
So now - take a look at the Tenkan-Sen line; it has just crossed below the
Kijun-Sen Line and the price is trading below the Kumo Cloud, which makes it a
valid entry.

However, the Chikou Span is trading above the cloud - so instead of entering the
market immediately, wait until the Chikou Span breaks below the cloud - then,
close your position once the price exceeds the Kijun-Sen Line.
By leveraging on Ichimoku, you can discover trends that are bound to last in the
longer-term - allowing you to make profits. You can check this strategy against
EUR/USD and you will realize the huge gains you could have made!