Make Money Using Ichimoku Kinko Hyo

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Ichimoku Kinko Hyo

Ichimoku Kinko Hyo?

Yes, you’re still in the right place. You’re still in the School of Pipsology and not in some Japanese pop or anime site.

No, “Ichimoku Kinko Hyo” ain’t Japanese for “May the pips be with you.” but it can help you grab those pips nonetheless.

Now that’s 3-in-1 for y’all! Also, know that this indicator is mainly used on JPY pairs.

To add to your Japanese vocab, the word ichimoku translates to “a glance”, kinko means “equilibrium”, while hyo is Japanese for “chart.”

Putting that all together, the phrase ichimoku kinko hyo stands for “a glance at a chart in equilibrium.”

Huh, what does all that mean?

A chart might make things easier to explain…

Whoops. That didn’t help. A few more lines and this will resemble a seismograph.

Kijun Sen (blue line): Also called standard line or base line, this is calculated by averaging the highest high and the lowest low for the past 26 periods.

Tenkan Sen (red line): This is also known as the turning line and is derived by averaging the highest high and the lowest low for the past nine periods.

Chikou Span (green line): This is called the lagging line. It is today’s closing price plotted 26 periods behind.

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Senkou Span (orange lines): The first Senkou line is calculated by averaging the Tenkan Sen and the Kijun Sen and plotted 26 periods ahead.

The second Senkou line is determined by averaging the highest high and the lowest low for the past 52 periods and plotted 26 periods ahead.

Got it? Well, it’s not really necessary for you to memorize how each of the lines is computed.

What’s more important is for you to know how to interpret these fancy lines.

How to Trade Using Ichimoku Kinko Hyo

Senkou

If the price is above the Senkou span, the top line serves as the first support level while the bottom line serves as the second support level.

If the price is below the Senkou span, the bottom line forms the first resistance level while the top line is the second resistance level. Got it?

Kijun Sen

Meanwhile, the Kijun Sen acts as an indicator of future price movement.

If the price is higher than the blue line, it could continue to climb higher.

If the price is below the blue line, it could keep dropping.

Tenkan Sen

The Tenkan Sen is an indicator of the market trend.

If the red line is moving up or down, it indicates that the market is trending.

If it moves horizontally, it signals that the market is ranging.

Chikou Span

Lastly, if the Chikou Span or the green line crosses the price in the bottom-up direction, that’s a buy signal.

If the green line crosses the price from the top-down, that’s a sell signal.

Here’s that line-filled chart once more, this time with the trade signals:

It sure looks complicated at first but this baby’s got support and resistance levels, crossovers, oscillators, and trend indicators all in one go! Amazing, right?

Okey dokey, we’ve already covered a smorgasbord of indicators. Let’s see how we can put all of what you just learned together…

Best Ichimoku Strategy for Quick Profits

Best Ichimoku Strategy for Quick Profits

The best Ichimoku strategy is a technical indicator system used to assess the markets. This unique strategy provides trading signals of a different quality. Forex trading involves substantial risk of loss. Although, with Ichimoku cloud trading, those losses are contained and kept small.

The Ichimoku system is a Japanese charting method and a technical analysis method. Our team at Trading Strategy Guides mastered the method over a long period of time.

The Ichimoku indicator was published in 1969 by a reporter, Ichimoku Kinkou Hyo, in Japan. This candlestick trading technique has stood the test of time.

The name Ichimoku tells a lot about the trading system, or at least it gives a description of the system.

Ichimoku = “One look, glance”.

Kinkou = “Balance, equilibrium”.

Hyo = “Chart, Graph”.

Ichimoku cloud trading attempts to identify a probable direction of price. It helps the trader determine the most suitable time to enter and exit the market by providing you with the trend direction. It gives you reliable support and resistance levels and the strength of these market signals.

Before we delve deeper into the Ichimoku Cloud strategy, let’s look at the indicators needed to successfully trade the strategy.

The most popular Forex trading platforms use the Ichimoku Cloud indicator. The Ichimoku indicator paints all the components needed to help visualize the price action better. The Ichimoku cloud is one of the most comprehensive technical indicators in modern use. Unsurprisingly, it has quickly become the “go-to” indicator for forex traders around the world.

In the Ichimoku cloud section, we are going to give you an in-depth overview of the Ichimoku components.

So, before moving forward, let’s define all the Ichimoku Cloud components. We will review how to correctly interpret the trade signals generated by this technical indicator.

Ichimoku Cloud Explained

The Ichimoku Hinko Hyo is a momentum indicator used to recognize the direction of the trend. It can also define accurate support and resistance levels. The Ichimoku Cloud indicator consists of five main components that provide you with reliable trade signals:

  1. Tenkan-Sen line, also called the Conversion Line, represents the midpoint of the last 9 candlesticks. It’s calculated with the following Ichimoku formula: [(9-period high + 9-period low)/2].
  2. Kijun-Sen line, also called the Base Line, represents the midpoint of the last 26 candlesticks. It’s calculated with the following formula: [(26-period high + 26-period low)/2].
  3. Chiou Span, also called the Lagging Span, lags behind the price (as the name suggests). The Lagging Span is plotted 26 periods back.
  4. Senkou Span A, also called the Leading Span A, represents one of the two Cloud boundaries and it’s the midpoint between the Conversion Line and the Base Line: [(Conversion Line + Base Line)/2]. This value is plotted 26 periods into the future and it’s the faster Cloud boundary.
  5. Senkou Span B, or the Leading Span B, represents the second Cloud boundaries and it’s the midpoint of the last 52 price bars: [(52-period high + 52-period low)/2]. This value is plotted 52 periods into the future and it’s the slower Cloud boundary.
  6. Chikou Span, represents the closing price and is plotted 26 days back.

While the Ichimoku Cloud indicator involves multiple (five) different lines, reading the graph is actually very easy. Using the trend lines mentioned above, you will then need to determine whether Leading Span A or Leading Span B is currently higher.

Once Leading Span A and Leading Span B have been identified, the “cloud” component of this graph will be shaded in. When Leading Span B is above Leading Span A, this indicates to traders that price momentum is currently increasing. When this is the case, the graph will be shaded green.

On the other hand, when Leading Span A is below Leading Span B, the underlying asset is likely moving in a negative direction. When this happens, the cloud will be shaded red. Despite the graph’s complications, simply looking at the colors of the cloud can help you determine the direction of the market.

Here are some basic interpretations of the Ichimoku charts:

  • When the price is above the Cloud, we’re in a bullish trend.
  • When the price is below the Cloud, we’re in a bearish trend.
  • When the price is in the middle of the cloud the trend is consolidating or ranging.

Furthermore, the Ichimoku charting technique provides bullish and bearish signals of various strengths.

When the Tenkan crosses Kijun from below, it is considered a bullish signal. When the Taken crosses the Kijun from above, it is considered a bearish signal. The Kijun line is shown as the red line above.

The strength of the Ichimoku trading signals are assessed based on three factors:

  • How far away is the price movement relative to the Cloud?
  • How far away is the Chiou Span relative to the Cloud?
  • How far away is the Cross-over relative to the Cloud?

Because many of the lines on the Ichimoku Cloud chart are created using averages, the chart is often compared to a simple moving average chart. However, Ichimoku is more dynamic than a simple moving average chart as it’s designed to help detect changes in support and resistance.

The relationship between Leading Span A and Leading Span B will indicate whether there is a strong downtrend or uptrend. Pay attention to both the color (green for bullish, red for bearish) and the size of the cloud. When the “cloud” between these lines is small, then the trend will not be very strong.

The Ichimoku Cloud is useful for day traders and others who need to make quick decisions. The cloud is often paired with other technical indicators, such as the Relative Strength Index, in order for traders to get a complete picture of resistance and support. Many traders will also look out for crossovers in order to determine when trends have reversed.

Ichimoku cloud trading requires a lot of self-discipline. This is because you have to wait for the best trade signals. We’re going to use the default settings of the Ichimoku Cloud system.

Now, let’s move one step forward and learn how to make money by applying the Ichimoku trading rules.

Note* Moving forward, we’re not going to delete the Lagging Span moving average from our charts. This is because we don’t base our trade decision on it since it’s lagging the price.

The Best Ichimoku Strategy – Buy Rules

The Ichimoku Cloud system is designed to keep traders on the right side of the market. Our trading rules will help you follow the trend for as long as possible. At least until it’s clear that a reversal is occurring. The Ichimoku system suits swing trading best. This is because it maximizes profits while minimizing the risk involved in trading. Here is how to identify the right swing to boost your profit.

The Ichimoku Kinko Hyo best time frame is the one that fits you best. As we don’t have a preferred time frame.

This swing trading strategy will teach you how to ride the trend right from the beginning. You will also learn how to capture as many profits as possible.

Ichimoku Cloud Trading: Step by Step

Step #1 Wait for the Price to Break and close above the Ichimoku Cloud.

Ichimoku cloud trading requires the price to trade above the Cloud. This is because it’s a bullish signal and potentially the beginning of a new up-trend.

The cloud is built to highlight support and resistance levels. It highlights several layers deep because support and resistance is not a single line drawn in the sand. It is several layers deep.

So, when we break above or below the Ichimoku Cloud, it signals a deep shift in the market sentiment.

A high probability trade setup requires more layers of confluence before pulling the trigger.

This brings us to our next requirement for a high probability trade setup.

Step #2 Wait for the Crossover: The Conversion Line needs to break above the Base Line.

The price breakout above the Cloud needs is followed by the crossover of the Conversion Line above the Base Line. Once these two conditions are fulfilled, we can look to enter a trade.

The Ichimoku Cloud indicator is a very complex technical indicator. The indicator is even used as a moving average crossover strategy.

Now, we’re going to lay down a very simple entry technique for the Ichimoku Kinko Hyo trading system.

Step #3 Buy after the crossover at the opening of the next candle.

Ideally, any long trades using the Ichimoku strategy are taken when the price is trading above the Cloud. Our team at the TSG website has adopted a more conservative approach. We added an extra factor of confluence before pulling the trigger on a trade.

So, after the crossover, we buy at the opening of the next candle.

(Notice the strong buy signal in the graph below.)

The next important thing we need to establish is where to place our protective stop loss.

Step #4 Place protective stop loss below the breakout candle.

The ideal location to hide our protective stop loss is below the low of the breakout candle. This trading technique accomplishes two major things. Here is an example of a master candle setup.

First, it’s significantly lowering the risk of losing big money. Second, it helps us trade with the market order flow.

Since this is a swing trading strategy, we’re looking to capture as much as possible from this presumably new trend. We’ll be looking to trail our stop loss level below the Cloud or exit the position once a new crossover happens in the opposite direction.

The next logical thing we need to establish for the Ichimoku trading system is where to take profits.

Step #5 Take Profit when the Conversion Line crosses below the Base Line.

We only need one simple condition to be satisfied with our take profit strategy.

When the conversion line crosses below the baseline we want to take profits and exit our trade.

Alternatively, you can wait until the price breaks below the Cloud, but this means risking to lose some parts of your profits. In order to gain more, sometimes you have to be willing to lose some.

Note** the above was an example of a BUY trade using the advanced Ichimoku trading strategies. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.

(See the strong sell signal in the conversion line.)

Conclusion: Ichimoku Cloud Explained

The best Ichimoku strategy is slightly different than probably anything you’re used to when it comes down to technical analysis. If you’re having a very difficult time finding true support and resistance, please apply the Ichimoku cloud trading techniques highlighted in this course.

We hope that by now you’re convinced that the Ichimoku Cloud system is a good way of identifying the trends and profit from trading any market on any time frame. It can easily capture 80% of the trend if you follow the rules in the Ichimoku Cloud explained section.

Thank you for reading!

Please leave a comment below if you have any questions about Best Ichimoku Strategy!

Also, please give this strategy a 5 star if you enjoyed it!

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Ichimoku Kinko Hyo- What’s Best Time Frame to Use it?

Ichimoku cloud is short for “Ichimoku Kinko Hyo” and is a combination of a bunch of moving averages. It is used as a trading indicator that helps you identify buy and sell signals when trading on charts, assisting you with your final trading strategy.

Invest Diva students are trained to use Ichimoku Kinko Hyo for their short-term and long-term trades. It is part of the second point of the IDDA. Let’s first explain how Ichimoku operates, and then answer the question: “What’s the best time frame to use Ichimoku?”

The indicator contains different components including the Cloud, Tenkan, Kijun and Chikou lines which we will get into in a bit. The word Ichimoku means “first sight” in the Japanese language. This is love at first sight, baby!

By applying Ichimoku Kinko Hyo to your chart, you will know a lot of secrets about the market movements right away, especially if you are a visual trader. Even though the Ichimoku Cloud may seem complicated when viewed on the price chart, it is really a straightforward indicator that is very usable. Let’s bring this indicator into life and call it Mr. Ichimoku from now on.

Get Ichimoku Secrets Book

Are you getting as excited as I am? I am excited just talking about Mr. Ichimoku. And it is not only because I think Japanese guys are sexy. The full name of Mr. Ichimoku is actually Ichimoku Kinko Hyo, which can be translated as “a glance at a chart in balance.” A Japanese journalist called Goichi Hosoda invented this charting technique in 1936, and since then Ichimoku charts have become a popular trading tool in Japan.

Of course, love-at-first-sight can be complicated. But once you get to know it, magic can happen. Before we reveal the chart, let’s prevent a major brain meltdown by first introducing the stuff you are going to see on your chart when you insert Mr. Ichimoku onto it.

Ichimoku Kinko Hyo – Kijun Tenkan Chiko Senko lines

  • 雲 Kumo, or cloud
  • 基準 Kijun, or Baseline
  • 転換 Tenkan, or Turn line
  • 遅行 Chiko, or Delay

Now we are going to add all this stuff to the forex dance floor. Don’t panic; your eyes are going to get used to this, and after one day you will feel that a chart without Ichimoku is totally naked. First, let’s do a basic introduction, and then jump into the interpretation of Mr. Ichimoku.

Ichimoku Kinko Hyo – Chart Example

Kijun line (baseline, in solid thick pink color.) This is the average of the highest high and the lowest low within the past 26 candles. We can also call it the “slow line” because it reflects a whole 26 periods.

Tenkan line ( turn line, solid thin). This is the average of the highest high and the lowest low within the past 9 candles. We can also call

Chiko (sometimes spelled Chikou) span (delayed line, thick dashed). This shows the most recent candle’s price, but it is drawn 26 periods behind.

Kumo (cloud). This is the area between two lines that plot the future! The first thin dotted line is calculated by averaging the Tenkan line and the Kijun line plotted 26 periods ahead. The second one is determined by averaging the highest high and the lowest low for the past 52 periods plotted 26 periods ahead. These two lines are called Senkou spans. Senkou means “future.”

Download Ichimoku Secrets e-Book

One good thing about modern trading including those of forex, stocks, equities and even ETF platforms, is that you can choose different colors for each of the Ichimoku lines to make your party more colorful and to identify the lines easily. I usually like to use pink for the Kijun line, black for the Tenkan line, blue for Chiko line, and light green for the Kumo. Try it out on your demo platform and enjoy!

Ichimoku Interpretation

Here is a cheat sheet on how to trade using Ichimoku.

Ichimoku Kinko Hyo – Buy and Sell Signals

– As long as the five lines are parallel, the trend will continue in that direction.

– When the candles are inside the Ichimoku cloud, that means that the market is in the process of consolidating, and it is not a good time to buy or sell.

– The lower band of the prevailing cloud can be used as a layer of support. (See figure below)

– The upper band of the prevailing cloud can be used as a layer of resistance.

Ichimoku on a Downtrend and an Uptrend:

Ichimoku Kinko Hyo – Cloud Acting as Support and Resistance

Best Time Frames to Use Ichimoku Kinko Hyo

On our Premium Closed Investing Group, we had a question is from Ari who wrote:

“Hi Kiana, I find your book very easy to read. I noticed that you are a bit in favor of Ichimoku Kinko Hyo. My question to you is: what are the best time frames in correlation with Ichimoku? Peace! Ari”

ANSWER: Ichimoku Kinko Hyo or how I call it, Mr. Ichimoku, works best for visual traders. Just like any other indicator, the signals you get on charts with a different time period are different. So if you are adding Mr. Ichimoku on your 30-minute chart, you are likely to get a different signal than what you will get on a daily chart. The indicator is automatically calculated by your system based on the time frame that you are using, and it updates every time you change your time frame. So it all comes down to what type of a trader YOU are.

If you are a day trader or a scalper, then you can use Mr. Ichimoku on shorter time frames from 1-minute chart to 6-hour. If you are a longer-term trader like myself, then you can use Mr. Ichimoku on the daily or weekly charts. A lot of times it helps if you zoom in and out of time frames to get a better understanding of the market sentiment. Don’t forget that you should never rely on only one indicator when analyzing the markets. You should always make sure that you check in with all points of the Invest Diva Diamond Analysis before making a final trading decision.

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Ichimoku Calculations

Four of the five plots within the Ichimoku Kinko Hyo are based on the average of the high and low over a given period of time. For example, the Tenkan line is simply an average of the 9-day high and 9-day low. Before computers were widely available, it would have been easier to calculate this high-low average rather than a 9-day moving average. Here is how you can do the calculation, although you really don’t have to because your trading platform will magically do it for you.

Tenkan-line (AKA Tenkan-sen, Conversion Line): (9-period high + 9-period low)/2))

The default setting is 9 periods and you can adjust it. On a daily chart, this line is the mid-point of the 9-day high-low range, which is almost two weeks.

Kijun-line (AKA Kijun-sen, Base Line): (26-period high + 26-period low)/2))

The default setting is 26 periods and you can adjust it. On a daily chart, this line is the mid-point of the 26-day high-low range, which is almost one month).

Senkou Span A (Leading Span A): (Tenkan Line + Kijun Line)/2))

This is the midpoint between the Conversion Line and the Base Line. The Leading Span A forms one of the two Cloud boundaries. We call this “Leading” because it is plotted 26 periods in the future and forms the faster Cloud boundary, which helps traders with predicting future market movements.

Senkou Span B (Leading Span B): (52-period high + 52-period low)/2))

On the daily chart, this line is the mid-point of the 52-day high-low range, which is a little less than 3 months. The default calculation setting is 52 periods but you can adjust it. This value is plotted 26 periods in the future and forms the slower Cloud boundary.

Chikou Span (Lagging Span, Delayed Span): Close plotted 26 days in the past

The default setting is 26 periods but you can adjust it.

Okay, enough advertising about Mr. Ichimoku. It certainly is very powerful in many ways, but just like any other method, you should not rely on it alone. You always have to check in with other analysis techniques before you make a final decision in your trading.

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Oh, Ichimoku, what you do to me! My head is in the Ichimoku cloud, dreaming about the future of the romantic candles dancing at a Euro-American forex party. I look back and see the blue Chiko span following me. Then I look up, and I see the thick, pink Kijun line and the thin black Tenkan line dancing delightfully above me like danglers. I dream about the new set of earrings that I’m going to buy with my newly earned pips.

Wake up! You need to learn what each of these lines means before you think about buying new earrings with the money that you made at your forex party!

Ichimoku Kinko Hyo Practice

On your trading platform, find the tab button that inserts Ichimoku. Identify the Kumo (cloud), the Chiko span, the Kijun line, and the Tenkan line by moving your mouse over each of them. Note that the colors of the lines are different from the way I’m showing you here. In most trading platforms, you can change the color of the lines by going to Properties.

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What is the position of the candles against the cloud? What is the direction of the Kijun line and the Tenkan line? Is the Chiko span below or above the cloud? Is Ichimoku projecting a buy signal, a sell signal, or a wait-and-see signal?

Need to learn more about Ichimoku? Get my brand new Ichimoku Secrets book and be in the know.

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