The Ichimoku

Indicator
 The Ichimoku indicator features

The Ichimoku Kinko Hyo indicator was developed in the 30s of the 20th century. Its author is a financial analyst from
Japan Goichi Hosoda, also known under the pseudonym Ichimoku Sanjin. Goichi Hosoda created an indicator to
predict the movement of Nikkei index on the stock market of Japan.

Nikkei Index or Nikkei 225 is the main index of prices on the stock market of Japan. It is calculated as the
arithmetic average of the prices of 225 most traded companies shares. It reflects the general state of the
Japanese market.

Ichimoku is one of the most popular indicators for the analysis of the Forex market. It can be used as a complete
trading system, since it combines several approaches to forecasting of any changes on the Forex market. The
Ichimoku indicator determines a trend, support and resistance levels, sends signals to open positions.
Indicator
components
 Indicator components

The Ichimoku indicator is already integrated into the MetaTrader 4. It is usually used on the time frames H4-W1, since
the indicator is considered to be less effective on the lower time frames. This technical indicator consists of 5 lines:
 Indicator components
1st line – Tenkan-Sen – is the average price level in a short period of
time. The line indicates a trend on the market, and also shows its
direction. The steeper this line, the more pronounced is the trend. If
Tenkan is directed from bottom to top, it shows the short-term uptrend. If it
is directed from top to bottom – downtrend. If the line is horizontal, that
means a flat. In the screenshot we can see the downward trend.

2nd line – Kijun-Sen – is an analogue of the Tenkan line, but its values
span a longer period of time.

3d line – Chikou Span – this line is based on the closing prices and it is
shifted backwards. It works on the same principle as the Momentum
indicator. Chikou line compares the current price with the price several
bars ago. If this line is above the price chart, it means that buyings are
prevailed on the market. If below – sales.

4th line – Senkou Span A – is the average value of the Tenkan and Kijun lines. This line is shifted forwards the time period specified for the Kijun
line, i.e. it is ahead of the price chart.

5th line – Senkou Span B – is the average price in the longest period of time. That is, three lines of Tenkan-sen, Kijun-Sen and Senkou Span B
indicate the average value of the price, but in different time intervals. Also Senkou Span B line is shifted forwards in the time period specified for the
Kijun line.
 Indicator components

Senkou Span A and B form an Ichimoku cloud or Kumo. The cloud is hatched in the graph with color of the line which
is higher. That is, if Senkou Span A is above Senkou Span B, the cloud will be drawn in its color, and vice versa.

If the price is above the cloud, so bullish moods prevail on the market, i.e. there are more buyers than sellers on the
market. If the price is below the cloud, this suggests bearish moods, that is there are more sellers on the market. If the
price is in the cloud, there is a flat on the market.
 Indicator components
Senkou Span A and B lines also serve as dynamic levels of support and resistance. If the price is between them, the lower line
becomes the support level, and the upper line – the resistance level. If the price is above the cloud, its upper line is the first
support level, and the lower one is the second support level. If the price is below cloud, the lower line is the first resistance
level, and the upper one is the second resistance level. In the picture we see two support levels:

Levels of support and resistance are the conditional lines between which the price moves a certain period of time.
Then it can go up sharply, thereby overcome the resistance level, or go down and overcome the support level.
How to set Ichimoku in
MT4 and what you need to
know about periods
 How to set Ichimoku in MT4 and what you need to know about periods

To apply Ichimoku indicator in the MetaTrader 4 trading platform, go to Insert – Indicators – Trend – Ichimoku Kinko
Hyo. You will see the following values:

These are time periods that we have mentioned above. The period of 9 is set for the Tenkan line, 26 – for Kijun, 52 –
for Senkou Span B. Each number indicates the number of weeks, if we use the weekly chart, or a number of days, if
the daily one is used. That is, the value of the Tenkan line is constructed within the last 9 weeks (the average price of
9 weeks), the value of the Kijun line – within six months, i.e. 26 weeks, the value of Senkou Span B – within the year –
52 weeks.
 How to set Ichimoku in MT4 and what you need to know about periods

These parameters 9-26-52 were used by Goichi Hosoda. He argued that these are best to forecast the movement of
the Nikkei index. Someone trades with the same periods on the Forex market. You can adjust the periods to your
needs and observe, with what parameters Ichimoku indicator will be the most effective.
The Ichimoku
indicator signals
 The Ichimoku indicator signals

Ichimoku indicator lines intercross and interact with each other, giving some signals. We suggest to consider the most popular ones:

1. “Death Cross” – Tenkan crosses Kijun from top to bottom. This

suggests that the currency pair should be sold.

2. “Golden Cross” – Tenkan Kijun crosses Kijun from bottom to top,

that is a signal to buy the currency pair.

3. If Chikou crosses the price chart from top to bottom, it is a sell

signal, one should open sell orders. If Chikou crosses the price chart
from bottom to top it is better to open buy orders.

4. If Senkou Span A and Senkou Span B line intercross with each

other, this indicates a possible trend reversal. When Senkou Span A
crosses Senkou Span B from top to bottom, you need to sell. When
Senkou Span A crosses Senkou Span B from bottom to top, then
you need to buy.

Ichimoku indicator may seem to be complicated. But just try to use Ichimoku indicator and you’ll see how useful it is. This will not only tip for a trader,
but also to the whole trading system.
 Thank you for
watching
the presentation!