Ichimoku Kinko Hyo translates to one glance equilibrium chart or instant look at the balance chart and is sometimes referred to as "one glance cloud chart" based on the unique "clouds" that feature in ichimoku charting.
Ichimoku is a moving average-based trend identification system and because it contains more data points than standard candlestick charts , it provides a clearer picture of potential price action. Ichimoku factors in time as an additional element along with the price action, similar to William Delbert Gann 's trading ideas. However Ichimoku is also integrated by three other theories that improve and enhance the indicator:.
Wave Movement Theory . Target Price Theory . 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.
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. 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.
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.
Senkou span B calculation: The cloud edges identify current and potential future support and resistance points. The Kumo cloud changes in shape and height based on price changes. This height represents volatility as larger price movements form thicker clouds, which creates a stronger support and resistance.
As thinner clouds offer only weak support and resistance, prices can and tend to break through such thin clouds. Traders often look for Kumo Twists in future clouds, where Senkou Span A and B exchange positions, a signal of potential trend reversals.
In addition to thickness, the strength of the cloud can also be ascertained by its angle; upwards for bullish and downwards for bearish. Any clouds behind price are also known as Kumo Shadows. If the Chikou Span or the green line crosses the price in the bottom-up direction, that is a buy signal. If the green line crosses the price from the top-down, that is a sell signal. Goichi Hosoda also developed the time theory by differentiating 3 time ranges and two different levels: Proposing a numerical value that happened before and applying it from a point between the time range.
Goichi opted for a simpler version which is focused on pattern detection. Those patterns allowed him to monitor any trend structure but not to define clear target levels or take profits. He classified two main movements:. Those target prices left us a range at 1, —1, which is invalid to set as a possible target. From Wikipedia, the free encyclopedia.
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