Everything you should know about Ichimoku Kinko Hyo indicator
Ichimoku Kinko Hyo (IKH) is a very useful and informative technical indicator. It shows the direction of the dominant trend; its lines may serve you as solid supports and resistances, and its clouds will allow you to visualize momentum and trend strength. At first glance, Ichimoku Kinko Hyo might look very intimidating and mind-boggling, but once you understand how to read it, you will see that the information and the signals it provides are very helpful. In the following tutorial, we will tell you about the Ichimoku lines generating different trading signals, the so-called Kumo-clouds and lags. Then, we will explain how to analyze the market with this wonderful technical tool. So, let us cast a “glance at a chart in equilibrium” (literal translation of the phrase Ichimoku Kinko Hyo).
Kijun Sen (blue line, base line): it is a major indicator component of the Ichimoku Kinko Hyo indicator, it is used to measure medium-term momentum. It is calculated by averaging the highest high and the lowest low for the previous 26 periods. In lay terms, it marks the middle of the range of the past 26 candles.
Tenkan Sen (red line, conversion line): It is another turning line which is derived by averaging the highest high and the lowest low for the past nine periods. It shows the middle of the range of the previous 9 candles.
Chikou Span (green line): It is a lagging, delayed line. Its closing price can be found by shifting to the left for 26 periods. Think of it as of a reflection back to what’s already happen, as of a repaint.
Senkou Span (orange lines): The first Senkou line is the average of Tenkan Sen and the Kijun Sen shifted 26 periods ahead. The second Senkou line is the average of the highest high and the lowest low for the previous 52 periods and it is plotted 26 periods ahead.
Kumo (cloud): it is the shaded area between the two Senkou Span lines. The cloud is perceived as a price attractor. The price tends to retrace to its borders which are the price’s formal levels. In other words, the price very often revisit the levels it tested earlier.