Ichimoku Kinko Hyo indicator is aimed to work at weekly and daily charts. It defines the market trend, levels of support and resistance, shows signals to buy or to sell.
Indicator lines are based on 4 time intervals of different length:
- Tenkan-sen – first interval rates average, defined as the maximum and minimum total for this period.
- Kijun-sen – second interval average.
- Senkou Span A – middle of the distance between two previous lines, moved forward to the second time interval size.
- Senkou Span B – third time interval average, moved forward to the second interval size.
- Chinkou Span – price of the current candle closure moved back to the second interval size.
Senkou Span A and Senkou Span B lines form a so called cloud hatched with another color.
- If the price is located in the cloud, the market is considered to be non-trend, and the cloud sides are becoming the levels of support and resistance.
- If the price is located above the cloud, the two lines of the cloud are becoming the support levels.
- If the price is below the cloud, the two lines of the cloud are perceived as the resistance levels.
Chinkou Span that crosses the chart from the bottom to the top is a signal to buy, from the top to the bottom – to sell.
Kijun-sen points at market movements, the price is going to grow if it’s located above this line. Kijun-sen line crossing denotes the trend change
