Ichimoku indicator (download) - detailed description, settings. Ichimoku cloud indicator - description and strategies of the Ichimoku line
The trading strategy based on the Ichimoku indicator was one of the first trading systems that gained great popularity among traders around the world. In this she was helped by the complexity of the approach and the simplicity of identifying trading signals. Simply put, it had everything: how to analyze the market, when to enter it, where to exit. It arose in the 60s of the last century, and became widespread in the 80s, when there was a sharp surge in demand for software... This was facilitated by the emergence of the first banking electronic networks, using which it was possible to trade not by means of voice commands, as it was before, but by issuing commands through the trading terminal.
The technological leap has given ordinary people the opportunity to work for financial markets, because of which the people in the mass rushed to read books on Forex, on stock trading, the main economic theories, which were created by Wall Street sharks, not only. So, for example, the wave theory of forecasting market events has become widespread. It was at this moment that the Ichimoku indicator received its electronic display, which became the basis of an effective trading system, which immediately gained great popularity among private traders in view of its simplicity and efficiency.
Before considering the Ichimoku indicator, how it works as a whole, what elements it consists of and what it is capable of, it would not be superfluous to make a short excursion into the history of its creation. The name of the trading strategy comes from the surname of its author. To be more precise, even from his pseudonym - Sanjin Ishimoku. The real name and surname of the inventor is Goichi Hosoda. This is a Japanese analyst and practicing trader who first asked the question of creating an ideal trading strategy back in the 30s of the last century. Then, about the next 30 years of his life, Hosoda continued to improve the created analysis tool in every possible way and only in the 60s published the results of his creation.
The created system immediately found many fans, whose number grew exponentially every day. This popularity is due to two simple factors:
- the Ichimoku system consists of moving averages already familiar to everyone, so its structure was extremely close to understanding for everyone who had at least something to do with financial markets;
- The Ichimoku indicator always clearly informs when to enter, where to exit, where to place a stop loss, and where to place a take profit.
To understand how to use the Ichimoku indicator, you need to take into account that a well-known Japanese analyst developed his trading system for a specific financial instrument. It is about the stock index, which is called Nikkei in Japan, and the author recommended using his brainchild strictly on weekly timeframes (W1), which allowed, on the one hand, not to enter the market very often, and, on the other hand, gave an excellent opportunity to get into powerful price movements, which brought very large profits. And, in addition, the higher the scale of the graph, the less noise, which means that the analysis is easier and the chances of an erroneous result are significantly reduced.
It is very important to note here: despite the fact that the author himself was guided by the specifics of weekly charts and indicator settings in trading terminals, whether it be Meta Trader 4 or Meta Trader 5, or some other platforms, by default they are made specifically for large timeframes, when If desired, the Ichimoku indicator can be "accelerated". This will make it effective for days (D), hours (H) and even minutes (M). Below we will consider the classic version and Ichimoku settings for weekly timeframes, but below it will also be presented effective option and ready-made settings for time periods of one day (D1). Having studied this material, it will be possible, by analogy, to reconfigure the indicator even for minute charts.
Above has already been discussed briefly about integrated approach, which is a characteristic feature of the Ichimoku system, and now you can consider in more detail what opportunities it opens up to a trader. So, there are three main advantages that will help you understand why it is so important to understand what the Ichimoku indicator is, how to use it to generate large profits, paving the way for your own financial independence.
- The first information that is immediately given by the first glance thrown at the Ichimoku indicator is the definition of the trend. Thanks to this property, there is no need to use various additional trend indicators, and considering that Ichimoku is imposed directly on the price chart, this is a great advantage. It consists in the fact that the price chart does not narrow, being forced to share space on the monitor with charts of technical instruments, but retains maximum clarity, allowing the trader to focus on the main thing - on an objective analysis of the situation in the market.
- Another important feature is the determination of support and resistance levels. Considering that the work with the Ichimoku indicator was intended for large timeframes, this made it possible to immediately see a certain price channel, eliminating the need to further analyze the price chart, draw lines at the opening and closing points of candles, and so on.
- For Ichimoku, signals appear both up (Buy) and down (Sell). Moreover, it generates them in any kind of trend, even when the market is in the “flat”. This allows you to make good money, starting from the lines of the price channel, even when the market is "sleeping", being in an uncertain position.
At first glance, it may seem that the Ichimoku indicator is something very complicated, because the chart with the price is entangled by various lines, some of which intersect, forming some kind of shaded zones (the so-called Ichimoku cloud). In fact, there is nothing complicated, but the considered technical analysis tool consists of only 5 lines, 4 of which are the Japanese version of the famous moving averages - moving average, and the fifth is an analogue of the Momentum oscillator. As many traders joke, the worst thing is to remember the name of these lines, and everything else when working with the Ichimoku system does not cause any difficulties.
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Paying attention to the 5th line (Momentum), we can again emphasize the convenience of working with the Ichimoku indicator, since the trader will get an effective tool in his hands and does not take up space from the price chart, filling it with additional charts of various technical instruments that hinder rather than help. when they are used in an amount of 3 or more pieces.
If you attach the Ichimoku indicator to the price chart, you can see that two of its lines are shifted forward, ahead of the price chart. These are forecast trend lines, which are a modified version of the classic moving averages, devoid of their most important drawback - lag. Thanks to these 2 leading lines (senkou span A and senkou span B), a trader can look a little into the future, anticipating a trend decay or an impending correction. Below is a discussion of what the Ichimoku indicator consists of and how it works.
This subsection gives the name of the Ichimoku indicator lines, but before proceeding to consider their specificity and differences from each other, one should explain the originality of the approach of the author of the system, Mr. Hosoda. The classic American and European approach to calculating moving averages is to add the closing prices of trading candles over a period and divide by their number, which ultimately gives a smoothed average option used to determine the trend. This makes it even possible to effectively use Ichimoku for binary options, because the main thing there is just to know where the market is headed.
Hosoda approached the issue of calculating moving average more creatively than his American and European counterparts, creating a stronger moving average curve that was much better suited to the realities of trading, allowing traders to operate much more efficiently. The simple secret was that for his calculations he did not take the points of closing or opening of a candle, but the middle of its trading range. The practical value of this approach has been repeatedly confirmed over many years of using the Ichimoku trading system, and the most significant lines that the author included in the final version are presented below.
- Tenkan sen It is displayed in red on the chart, representing the fastest indicator line, the first to react to the events taking place. To calculate it, take the last 9 candles. If we remember that the indicator was originally created for weekly timeframes, then 9 candles allowed us to make a statistical cut over the last 2 months. The main purpose of Tenkan Sen is to determine the direction of the short-term trend. In principle, this line alone allows you to work effectively on Forex. To do this, you just need to enter the market following the trend, and when the line is broken, turn in the opposite direction.
- Kijun sen (Kijun sen). On the price chart, this is the blue line, which is also called the "standard" level. It is averaging according to the method invented by Hosoda for the last 26 candles, that is, for the last six months on weekly charts. If you use the previous Tenkan line as a trade, following the trend, then the main danger for the trader will be periodic corrections. So, in order to accurately determine them and add at the end of corrections, increasing profits, you can use Kijun Sen as a support / resistance level, which shows the presence of a strong mid-term trend.
- The next two lines are leading moving ones: senkou span A and senkou span B. The first of these lines is calculated as follows. To begin with, a range is taken between the Tenkan and Kijun lines. It is divided in half, getting the average value, which is then shifted forward 26 periods, which ultimately gives the points for plotting senkou span A. their interests.
The strongest line is senkou span B. It is calculated in the same way as the previous one, but with a shift forward by 52 weeks. If we recall again that Hosoda tried to develop an ideal system for trading primarily on weekly charts, then 52 weeks is one calendar year. Accordingly, if a "rebound" occurs from this line, then we can expect a directional movement in the direction of the "rebound" for another year !!! In fact, senkou span B is the very long-term coveted by many that allows you to make big fortunes.
By the way, if senkou span B does not bounce off, then it does not matter either, because then there are two possible scenarios for the development of events - a reversal or a flat. In the event of a breakout, one can talk about a trend change, close existing positions and open new ones in the opposite direction, knowing that the entry will take place at the very beginning of a long-term perspective. When the trend fades and the market enters an indefinite phase, you should close existing orders and take a wait-and-see position, understanding that as soon as the market is ready for a new strong movement, the Ichimoku indicator will immediately report this and allow you to enter at the beginning of the incipient impulse.
In addition to the lines, the indicator contains the so-called Ichimoku cloud - this is a shaded area, the very "cloud" that represents the space between senkou span A and senkou span B. Depending on which of these lines is on top, the space between these lines is painted over into one of two shades. Usually, when prices go up and senkou span B is lower than senkou span A, then the "cloud" gets a golden shading, and, on the contrary, a pale brown.
The Ichimoku Cloud is the most interesting element in this indicator. The fact is that as soon as the price enters this zone, the trader immediately understands that there is uncertainty in the market and it is better to refrain from trading. The price can "hang" in this zone for quite a long time, not allowing to work effectively, so the trader can do only one thing - to wait. On the other hand, the price exit from the Ichimoku cloud is always a strong signal that at last you can safely join the movement, counting on good profits.
The last element of the Ichimoku indicator is the Chinkou Span line, usually displayed in green, which follows the price. If senkou span A and senkou span B are running in front, and Tenkai and Kijun are close to the current prices, then Chinkou Span always lags behind, being somewhere behind. As already mentioned, Chinkou Span is a 100% analogue of the well-known Momentum indicator. Calculating values for Chinkou Span points is straightforward. To do this, the average closing price of the candles for the past period of time is subtracted from the closing price of the current candle. The Ichimoku indicator uses a shifted backward interval of 26 candles, with which the closing level of the current one is compared.
Having mastered what each of the lines of the Ichimoku indicator means, you can consider how to use it in practice to your advantage. All signals that this wonderful technical analysis tool generates are quite simple and will help you make good money on any timeframe. Below are the most typical situations that a trader encounters when using this technical analysis tool. If you wish, you can also read additional literature and watch a video about the Ichimoku indicator, which will help you better understand various specific points when working with it. From the literature in Russian there is a good book by A.Yu. Terekhova entitled "The Ichimoku indicator as the basis of a trading system"
- The first type of signals that the Ichimoku indicator gives traders is the intersection of fast and slow. Since there are two pairs of such lines in their system, then, accordingly, traders should expect two types of trading signals:
- Tenkan Sen crosses Kijun, if the intersection goes from bottom to top, then you can buy, and, conversely, when the fast crosses the slow from top to bottom - you need to sell;
- senkou span A crosses senkou span B - the same pattern: if line “A” crosses line “B” from top to bottom, then the trader opens a short position - to sell, and when this suppression occurs from the bottom up - long - to buy.
The Ichimoku indicator, as the basis of a trading system, is a great way to always "catch" good trends, and it often allows you to enter at the very beginning of an emerging powerful movement, which, of course, guarantees a high potential for possible profits. But, if everything is clear with buy signals, then you should also analyze the sell signals. There is no need to consider each of them separately, since the exit point will be receiving a signal to enter in the opposite direction.
For example, if a trader bought a currency when the Tenkan line crossed the Kijun from the bottom up, then he should close this order and open a new one, but already for sale, as soon as Tenkan crosses the slower Kijun from the top down. The exit signal does not necessarily have to be the crossing of the same lines, that is, if a trader bought under the conditions described above, when Tenkan broke through Kijun, then he can close the position even when the Senkou B line crosses from top to bottom by the Senkou A line, and so on. That is, any signal in the opposite direction, which is given by Ichimoku, is a mandatory exit point and a promising position for a new entry into the market.
This exit strategy has one drawback. If the movement was, for example, upward, and then began to fall, but the Ichimoku indicator has not yet given a signal to sell, then the trader is in a zone of uncertainty, not knowing what exactly is happening on the market now: either the price is making a correction, or a change is being prepared trend, not yet confirmed by a sell signal.
In the event of a correction, the trader waits and then continues to accumulate profits, but in the event that a trend change should occur, a delay in the signal will force the trader to give up part of his income, which is a rather painful process. Therefore, many analysts advise to study the reversal candlestick patterns and close the position as soon as the price chart shows one of them. Further, there are two possible scenarios for the development of events:
- if, nevertheless, the appearance of a pronounced candlestick reversal pattern was caused by a deep correction, then a trader can again enter a position along the trend as soon as a rebound from the key lines of the Ichimoku indicator occurs;
- otherwise, the trader will keep part of his profit and when the Ichimoku signal is already received on new entrance into the market, he will be able to take an advantageous position in the opposite direction.
Beginners who are not familiar with candlestick analysis can be advised to read Steve Neeson's book “ Japanese candles", where simple language the essence of this phenomenon is outlined and all the main patterns of reversal and confirmation of the trend are given, which will help to get more accurate signals Ichimoku, significantly increasing the effectiveness of their trading.
Another important point when working with the Ichimoku indicator is how to react to the received signal. What does it mean? For example, Tenkan crossed the Kijun and rushed up. Like
everything is clear, you need to buy. This is true, but in most cases such a moment is already accompanied by a strong price movement, which means that the trader will most likely enter somewhere at its very top, after which a rollback will inevitably follow sooner or later.
It is extremely important to consider this state of affairs if a trader enters with a large lot and may simply not survive a deep correction. Of course, this is done only by beginners who are not familiar with the rules of risk management, but an experienced trader does not need to endure a price drawdown if it is possible to minimize the impact of this unpleasant phenomenon. To act as efficiently as possible, you can do one of two ways:
- use a small lot to enter the market, which should be approximately two times less than the one that the trader wanted to enter initially;
- first wait for the correction, and then open a position in the direction of the emerging new trend.
With the second case, everything is clear, and the first requires additional explanation. A trader enters immediately upon receiving a signal with a small lot, which makes it possible to already be in the market, but not to fear for his deposit in the event of a rollback. Further, as soon as it happens, the trader adds a position at the completion of the correction and takes a position that is profitable from the point of view of obtaining the maximum profit.
Like any other trading system Ichimoku generates signals of varying reliability. Accordingly, having seen one of them, you should throw everything and open with the maximum lot, and if you do not, you will need to act extremely carefully. To work with the Ichimoku indicator to bring maximum benefit, you should familiarize yourself with the main situations that are often encountered in the trading process and require additional clarification.
The first group includes the exit from the Ichimoku cloud. This is the strongest signal that this indicator can give. If we remember that the "cloud" is a zone of uncertainty, when the price makes unpredictable fluctuations, then the exit from it is usually accompanied by an extremely powerful impulse, which will push the price in the chosen direction for quite a long time, which means it will allow the trader to enter at the beginning of a new trend and get good income.
Seeing a way out of the Ichimoku cloud, one should not hesitate to open in the direction of the breakout, but at the same time, one should not neglect the basic safety rules that are dictated by: risk management, setting stop-losses and similar safety measures.
When neutral signals appear, you should act with caution, since here you can usually count only on a short-term price movement. An example of such a neutral signal can be the crossing of the Kijun line by the Tenkan line from the bottom up, which will occur while the price is in the Ichimoku cloud. That is, on the one hand, there is a clear and reliable signal, on the other, the price is in the zone of uncertainty, where it is difficult to give a confident forecast regarding the further development of events.
How to use Ichimoku in such cases? Is it worth working out the signal or would it be better to stay on the side? To this question experienced traders give an unambiguous answer - it is possible and necessary to trade, however, you should remember about some of the main points of work on the Ichimoku indicator. Once in the cloud, senkou A and senkou B lines should be viewed as support and resistance levels, which should become the basis for work in the uncertainty zone. That is, as soon as a signal appears, you can act, but when the price approaches the boundary levels, a reversal movement should be expected, therefore it is important at this moment either to pull up the stops as close as possible, or simply close the deal, fixing the profit, and wait for further developments.
The weakest signal for Ichimoku is a recommendation to open a position, in which the price immediately hits the "cloud". That is, for example, Tenkan stopped Kijun from top to bottom, which means that you can sell. However, the price is already entering the cloud, which means that strong braking and further uncertain movement should be expected.
The question of whether it is worth working in such conditions should be answered in the affirmative, since the scale of the charts is still quite large, therefore, having worked even 2-3 candles, you can still make good money. The main thing is to pull up stop-losses closer when entering the cloud and monitor further developments. If the movement continues, then it is possible not to close the position yet, and when it is already clear that the price movement is dying out, then it will be possible to exit this risk zone either by the triggered "stop" or by visual analysis of the current situation.
As already mentioned, the intersection of senkou A and senkou B is a good signal to enter the market, however, it has certain characteristic features that are also important to take into account in order to perform more efficient actions in the financial markets. Usually, when the faster one (senkou A) crosses the slower one (senkou B), there is already a good move in one direction or another in the market. Therefore, a trader who is already holding a position can use this Ichimoku signal to add, and a trader who missed the initial move can enter the market.
But both should first be analyzed current situation to get the most out of the opening new position... The purpose of the preliminary analysis is to determine the price channel and the already established levels of resistance and support, after which it should become clear what to do next. If, for example, at the moment of receiving the signal, the price is pressed against the resistance level, then you need to wait with the entry, since, for obvious reasons, there is a high probability of "running into" a correction. Accordingly, the best place to enter would be to open a position when the price approaches the support level.
Since the Ichimoku indicator is more aimed at finding a new trend and following it, it is very curious for many traders to know what to do when the market is in a flat, that is, makes sluggish price movements in a sideways trend. At these times, the moving averages also continue to intersect, forming trading signals and earning opportunities.
However, on this issue, all experienced traders are unanimous. Signals received from Ichimoku when the market is in the "sideways" should be completely and completely ignored! However, this does not mean that you should not look for opportunities for profit here either. What can a trader do if he has to miss the indicator signals? He can bring to his aid technical analysis, since very promising figures are usually formed in the sidewall: triangles, a flag, and so on. Accordingly, with a price breakdown of the significant lines of these figures, you can make very good money.
Classic trading using technical analysis has established a simple rule: "When making a deal from the line, you need to put a stop loss behind it." Here, a line can mean a support level, trend, Bollinger band, some kind of Fibonacci border, and the like. In this case, Ichimoku offers several options for levels from which you can confidently trade, and in order to protect yourself, I recommend the trader to set a stop loss at a distance of 10 points from the line.
It must be remembered that 10 points are only a recommendation. If you trade on relatively small timeframes, where there is a lot of noise, or on pairs with high volatility, then the stop loss should allow you to overexpose random fluctuations and stay in the market. In order to accurately determine this moment, you can use the ATR indicator, which measures volatility. That is, the stop loss can be more than 10 pips - 15 or 20.
There are two main guidelines for setting stop losses, depending on personal preference and expectations. If the signal to open an order is the intersection of Tenkan and Kijun, then stop loss can be set in two places - one behind the Tenkan line, and as alternative option- behind the Kijun line. The first option is considered to be more optimal, as it allows you to keep a part of the income received when the trend changes. However, it does not allow waiting out a deep correction and a more reliable level for setting a stop loss in the Ichimoku trading system will be a point at a distance of 10-20 pips from Kijun.
A similar situation with stops is observed when the "Ichimoku cloud" is broken. The closest stop loss can be placed immediately after Spankou A, but, as in the previous case, it is most reliable to set it behind the strong slow moving line - Spankou B. That is, the trader has to choose between caution and the ability to follow the trend for a long time.
Considering the advantages and disadvantages of setting a stop loss in each of the two cases, a trader can choose the option that is more optimal for himself at his own discretion. It is extremely important to determine in advance the preferred choice of risk management in cases where the Ichimoku advisor is used for work, since the robot will act according to the algorithms embedded in it, which means that in order to obtain the expected result, in some cases the trader will have to correct the processes that run software product for automated trading.
The classic Ichimoku settings, which were proposed by the author of this indicator, are set by default in almost all trading terminals. As already mentioned, this tool was developed to work on weekly charts, so Mr. Hosoda assigned Tenkan sen a period of 9 candles, Kijun sen - 26, Spankou span B - 52. The offset for Spankou span A and Chinkou Span is 26 candles.
As promised at the beginning of the article, here are the settings that will show how to trade the Ichimoku indicator on D1, that is, on the daily timeframe. To do this, you need to select an indicator in the list of trading terminal instruments - "Ichimoku", and by clicking on it with the right mouse button, activate the context menu, where there is an option "Attach to chart". After confirming this action, an additional window will open with a description of the indicator, where you should go to the "input parameters" tab and apply the following settings: Tenkan sen - 5 candles, Kijun sen - 13, Spankou span B - 34, offset for Spankou span A and Chinkou lines Span must be set at 13 candlesticks.
By analogy, you can accelerate the Ichimoku indicator up to its effective use on M5. As the reviews of some traders show, the Ichimoku system is quite efficient on small timeframes and can be used for scalping.
Outcome
As you can see, the Ichimoku indicator is a ready-made trading system that, with proper experience, is capable of bringing substantial profits to the trader using it. Considering that it was developed for large timeframes, where there are few false signals and high levels of income from powerful price movements, studying and testing it is simply a must for everyone who wants to master the profession of a trader and quickly go from a beginner to an experienced and financially independent professional.
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Ichimoku is an indicator represented by a combination of five lines, three of which are moving averages, and two are their derivatives. Ichimoku not only detects the presence, but also provides information about the location of the zones, and also determines the pullbacks of the trend. The Ichimoku indicator was developed in 1930 by the Japanese analyst Goichi Hosoda (pseudonym Sanjin Ichimoku), and was presented to the public only in 1960 as a tool for analyzing behavior. V trading terminal The QUIK Ichimoku indicator is represented by five lines on the price chart, two of which form the so-called "cloud" (the dotted-line range between the two lines).
Rice. 1. Display of the Ichimoku indicator in the QUIK trading terminal
Ichimoku indicator logic
Each of the indicator lines has its own name and construction method and, accordingly, its own different meaning:
Tenkan is a moving average of the medial price (Median Price is the sum of the high and low divided by two) with a period of 9. In the standard form, it is a purple line. Tenkan is the fastest of the Ichimoku lines and shows the current trend with its slope (upward slope - uptrend, downward - downtrend, sideways - flat).
Kijun is a moving average of the medial price over a longer period of time (usually 26). The Kijun is usually drawn as a red line that indicates the current price direction. So, if the price is higher than Kijun, then the uptrend will continue rather than change. If the price is below Kijun - downtrend in force and is likely to continue. If the price crosses Kijun, this is evidence that the current trend is already in question. In fact, the Tenkan Kijun intersection duplicates the logic of the intersection of two moving averages (EMA) of different periods, thereby giving signals to make deals in accordance with the direction of the intersection.
Senkou Span1 is the first line of the “cloud” and is a derivative of Tenkan and Kijun, since it is their average value shifted forward by the Kijun period (26). Senoku Span1 is usually displayed in blue and serves as support / resistance for the current trend.
Senkou Span2 is the second line of the “cloud” and the slowest of the indicator lines: its averaging period is 52, in addition, Senkou Span2 is shifted forward by the Kijun calculation period (26). Serves as the second line of support / resistance of the current trend. Usually displayed in green.
In essence, the “cloud” formed by the Senkou Span1 and 2 lines is a support / resistance zone of the trend. And also - a trend "indicator": if the price is in the "cloud" - the market is sideways, and if the price is outside the "cloud" - there is a trend in the market (if the "cloud" is at the top, then the trend is downtrend, and if it is below, then the trend is ascending) ... The color of the “cloud” also testifies to the current trend. If the cloud is colored in the color of the first line (blue), then there is an uptrend in the market, and if it is in the color of the second line (green), it is a downtrend.
Chinkou is a line formed by closing prices of periods shifted back by the Kijun value (26). Chinkou is usually displayed in brown. If the line crosses the price from the bottom up, this is a signal to buy, if from top to bottom - to sell.
Ichimoku trading signals
The Ichimoku indicator gives the strongest signal if the price was in the “cloud” and left its border. In this case, the market is considered to have exited the flat and become trending. The deal is carried out in the direction of this breakout with a stop order being placed behind the second (far) border of the "cloud".
Rice. 2. Trades on the Ichimoku indicator when the price exits the cloud
It is believed that if the lines Tenkan, Kijun Senkou Span1 are located sequentially and parallel to each other, then a stable trend has come to the market. If the price rolls back during the trend development to one of these lines, it is advisable to add or restore positions along the trend.
Rice. 3. Trading Ichimoku when touching the lines with a steady trend
Weaker signals will be signals to make deals when the Tenkan and Kijub lines cross (in the direction of the crossing) and the price crosses the Chinkou line.
Rice. 4. Trades on the Ichimoku indicator at the intersection of Tenkan and Kijun and at the intersection of the price and Chinkou
Displaying the Ichimoku indicator in QUIK
Now - how to use Ichimoku in the QUIK trading terminal. To display the indicator in the program, press the Insert key and call the "Add Chart" window, in which you should select the Ichimoku indicator from the list of available indicators. Then you should press the "Add" button.
Rice. 5. Adding the Ichimoku indicator in the "Add Chart" window
After completing the specified actions, five indicator lines will appear on the price chart.
Rice. 6. Basic display of Ichimoku
To edit the Ichimoku indicator, press the key combination Ctrl + E and open the "Edit chart settings" window. In this window, select the area containing the indicator and move to the "Parameters" tab, where you can configure the display color and parameters for calculating the indicator lines. The changes will take effect after pressing the OK button.
Rice. 7. Editing Ichimoku indicator settings
Output
Ichimoku is a very interesting trading system that is based on moving averages and shows that even basic indicators can produce very productive trading systems.
Today, hundreds of different indicators can be found in the public domain. Oscillators, trend or simple helpers that save us from a constant routine.
However, in order to make money with their help, it is necessary to build whole algorithms, combine several instruments at the same time to create a kind of trading strategies.
At the same time, there are very informative system tools that seem to be incomprehensible indicators, but in fact turn out to be entire trading systems!
The most interesting thing is that one of the representatives of such indicators is almost in front of every trader's nose, and it is called Ichimoku Kinko Hayo ...
Ichimoku Kinko Hayo indicator
It is safe to say that the Ichimoku Kinko Hyo indicator, is used by a very small number of traders.
And this happens due to the apparent complexity of the indicator, exotic terms, such as Tenkan-sen, Chinkou Span, etc., as well as the lack of a clear user guide.
Technical analysis, as well as its tools, are immensely popular among traders, thanks to the simple and understandable algorithm for the operation of strategies, tools, which can be curbed by almost everyone, without any skills.
All technical indicators are built automatically on the chart, with the help of a computer and a trading terminal.
But earlier technical analysis was far from being as pleasant as it is now, because all constructions and reconstruction of instruments on the chart were done manually -)
Just imagine that the "ancient" traders not only drew charts by hand on huge Whatman paper, but also calculated three-level formulas and displayed them on the chart!
Background of the Ichimoku indicator
The Ichimoku indicator has several names, for example, (Ichimoku Cloud), or the more well-known Ichimoku Kinko Hyo and it really is a brilliant invention of the past, which does not become obsolete after almost 80 years!
And I am often asked questions like - “Sergey, is this indicator relevant now? After all, you wrote about him three years ago. " -)))
Ichimoku was invented in 1930, when trading platforms were out of the question, and the publication and unveiling of the ingenious invention took place in 1968. By the way, Ichimoku was created for long-term forecasting of the Japanese Nikkei index, and its author is Japanese analyst Hosoda Goichi.
From some sources it is known that for the construction of indicators, the author constantly attracted students, who thus underwent practice. Probably no one knows whether it is true or not, but we know the Ichimoku Cloud as an excellent tool for forecasting.
Yes, the tool has become so popular that it is now present in almost all well-known professional platforms. There is even an excellent strategy with the Ichimoku indicator, I recommend it!
In your Metatrader, the indicator is in the trend section, and it looks like this on the chart:
Characteristics of the Ichimoku lines
Ichimoku Kinko Hyo is technically an extremely complex system tool, which in fact is built of five lines, although in the terminal we can observe only three lines and a certain cloud.
Each line has its own name and assigned color, so you will not be able to confuse them after reading the description:
- Tenkan-sen and Kijun-sen... These two lines are a kind of moving averages, which show us the average value between the high and low of a candle for a certain number of them. Tenkan measures a shorter time frame, namely 8 candles and is displayed as a red line. Kijun, at the same time, covers a larger price area - 26 candles and is displayed with a blue line;
- Chikou Span... This line practically repeats the price movement, that is, it is a simple moving average, which is shifted back by 26 candles. It is represented by a green line in the indicator and it can hardly be confused with another, since it is behind the chart;
- Senkou Span A and Senkou Span B... These two lines form a cloud, which is shifted into the future by 26 candles.
Ichimoku indicator signals
As already noted, there are five lines in Ichimoku Kinko Hayo, so there are really many types of signals and functions that the indicator gives us. Actually, it is not for nothing that the indicator is called the whole system.
Let's take a look at the basic signals and use cases for lines ...
The principle of signal processing is very simple - if the Tenkan crossed the Kijun from the bottom up - we buy the "Higher" option, and if the Tenkan crossed the Kijun from the top down - we buy the "Below" option.
In the first case, the signal is usually called the "Golden Cross", in the second case, the "Dead Cross". Simple example:
In practice, this signal is often difficult to interpret, especially from a psychological point of view, since the cloud itself is displaced forward. Nevertheless, if Senkou Span A crosses Senkou Span B from top to bottom - we consider the buy point of the "Below" option, if Senkou Span A crosses Senkou Span B from the bottom up - open the "Above" option.
Despite the fact that the Chikou Span is shifted back and dangles somewhere in the past, it is she who gives one of the strongest predictive signals that arise as a result of the crossings of the price and the green line of the indicator.
If the Chikou Span crosses the price from top to bottom - buy the "Down" option, when the Chikou Span crosses the price from the bottom up - buy the "Up" option.
Cloud ( Ichimoku Cloud) Is a simple market health indicator that allows you to see a clear picture of the trend direction.
When the price of an asset is placed above the cloud, bulls dominate the market (bullish trend), if under the cloud, bears dominate the market.
The market phase, when the price enters the cloud itself, is called a flat, so it is better not to trade during it! It is also worth considering signals to exit the cloud - to open positions in case of its through breakout and going beyond the borders.
It is worth considering the fact that, Ichimoku was designed for trading on a weekly chart! Therefore, if you change the timeframe to a lower one, reduce the settings, because otherwise the instrument will be too late !!!
There are no optimal parameters other than the standard ones, so optimization is done on an individual basis!
Many novice traders consider the Ichimoku indicator too complicated and do not use it in trading. This impression is created due to the fact that the instrument consists of five lines at once, forming different levels and zones. But is this indicator so complex as to refuse signals, or is the tool still worth the time to study it?
Description and features of the Ichimoku Kinko Hyo indicator
The Ichimoku indicator was developed much earlier than most technical analysis tools: it was created by Japanese trader and analyst Goichi Hosoda back in the 30s of the last century. Of course, in those years, all constructions were made by hand, and this influenced the appearance of the instrument. After calculating the indicator values using special formulas, the points on the chart were connected by straight lines, therefore, unlike classical moving averages, the Ichimoku lines have a somewhat “broken” appearance.
The Ichimoku Kinko Hyo indicator includes 5 lines, each of which is built according to a specific formula:
- Kijun (blue line). To calculate it, at each point, the arithmetic average of the minimum and maximum of a candle is taken, and then the average value of this parameter is calculated for the last 26 candles. In simple words, this is an analogue of the 26-period moving average.
- Tenkan (red line). It is built on the same principle as Kijun, only with a period of 9.
- Chinkou (green line). The line drawn from the closing prices moved back 26 periods.
- Senkou A (Up Kumo, orange line). Average Tenkan and Kijun, shifted forward 26 periods.
- Senkou B (Down Kumo, gray line). The arithmetic average of the high and low of each candle for 52 periods, shifted forward 26 periods. Forms a common area in conjunction with Senkou A.
Formula for calculating the Ichimoku indicator
Tenkan-sen = (Max (High, N) + Min (Low, N)) / 2
where:
Max (High, N) - the highest of the highs for a period equal to N - intervals (for example, N days)
Min (Low, N) - the smallest minimum for a period equal to N - indetrvals
N - period length
Kijun-sen = (Max (High, M) + Min (Low, M)) / 2
M - period length
Chinkou Span- Current Close, shifted back M
Senkou Span A = (Tenkan-sen + Kijun-sen)
Senkou Span B = (Max (High, Z) + Min (Low, Z)) / 2 shifted forward by M intervals
Z - the length of the intervals
The Tenkan and Kijun lines work alone and together as moving averages, their mutual intersections, as well as intersections with the price chart give buy and sell signals. Two Senkou lines form a support or resistance zone, being the first and second levels, depending on the trend.
Installing and configuring the indicator
The Ichimoku indicator is included in the standard package of instruments trading platform MetaTrader 4, so its installation is pretty straightforward. You don't need to search for it on the Internet and download it from third-party resources, just open the “Indicators list” tab on the terminal toolbar and select Ichimoku Kinko Hyo in the “Trend” category.
In the settings window, you can change three parameters: the periods of the Tenkan, Kijun and Senkou B lines. Senkou A is calculated using the Tenkan and Kijun values, therefore it does not have its own parameter in the settings. Chikou is entirely dependent on the closing price. The offset of each line is set by default and cannot be changed.
After the instrument is set on the chart and configured, you can proceed to trading on the Forex market.
Ichimoku Kinko Hyo Trading
Ichimoku is a complex indicator that provides a trader with many different signals. Some of them are quite simple, such as the Golden Cross, which is formed when the Tenkan crosses the Kijun from the bottom up and gives a buy signal. The “dead cross”, on the other hand, signals a sell, and is formed when the Tenkan line crosses the Kijun from top to bottom.
You can also trade inside the "cloud" formed by the Senkou A and Senkou B lines (it is shaded on the chart). When the market is in a flat (signaled by a horizontal Tenkan), fast scalping trades can be opened when the price bounces off one Senkou line and rushes to another.
However, in order to make trading more efficient, it is recommended to open deals at once using several signals generated from the interaction of the indicator lines with the price chart and with each other.
A simple, but already quite optimized trading strategy for Ichimoku Kinko Hyo looks like this (using the example of opening a buy trade):
- The Tenkan line crosses the Kijun from the bottom up.
- The price chart crosses both lines in the same direction.
- The price is bouncing up from the “cloud” formed by the Senkou lines.
Price pushed off Senkou and broke through Tenkan and Kijun from the bottom up
In this case, the indicator gives three signals at once, which increases the likelihood of concluding a profitable trade. At the same time, you do not need to install any additional indicators on the chart, all technical analysis is carried out using one tool.
Despite the complexity of Ichimoku, some professional traders combine it with other indicators. This approach requires more experience and speed of decision-making, however, after some practice, it will not seem too difficult even for a novice trader.
Ichimoku + Stochastic Strategy
Ichimoku - trend indicator, therefore, it is most logical to supplement its signals with an oscillator filter. Ichimoku works best in conjunction with the Stochastic, since the RSI, although it is a fairly popular indicator, very rarely gives signals, which means that the coinciding readings of the two indicators will be even more rare.
In this strategy, the stochastic oscillator will warn the trader against making deals at those moments when the trend has already dried up and the Ichimoku signal is clearly lagging behind.
Sell trades according to the Ichimoku + Stochastic strategy are opened if the following conditions are met:
- The lines on the chart are drawn in the order of Kijun-Tenkan-price.
- The price is repelled by the "cloud".
- Stochastic is not oversold, the oscillator lines are directed down.
The strategy is quite versatile and suitable for trading on almost any timeframe, except, perhaps, M1 and M5. Forex major pairs, as well as CFDs on gold and silver, can be used as a trading asset.
Advantages and Disadvantages of Ichimoku Kinko Hyo
Ichimoku is a fairly versatile and effective tool, in addition, it is more time-tested than any other indicator of technical analysis. Ichimoku Kinko Hyo can be used to search for signals in both Forex and the stock market, as well as when trading cryptocurrencies.
The main drawback of Ichimoku is inherent in almost all trend indicators - its signals are very often lagging. The lines drawn on the averaged values show the previous price values in a modified form, but they cannot accurately and timely predict the moment of a new trend development. That is why Ichimoku must be combined with an oscillator, even if it seems that this Japanese instrument has enough signals of its own.
Trading in financial markets carries a high level of capital risk. In order to reduce risks, it is recommended to strictly follow the rules of money management and always set Stop Loss. All decisions that a trader makes when working on Forex are his personal responsibility.
Every trader has heard about the Ichimoku Kinko Hyo indicator at least once. This indicator was created in Japan by a certain analyst Goichi Hosoda, but in the literary circle it was known as Ichimoku Sanjin (Ichimoku Sanjin).
This tool was originally created for the Nikkei index, but later it was used to analyze all assets. Although it is customary to use it in pairs where JPY is present.
Features of using the Ichimoku Kinko Hyo indicator
The Ichimoku Kinko Hyo indicator has proven itself well in Forex trading, as it helps to accurately determine the levels at which to enter and exit the market, as well as to correctly place limits and even stop loss orders. But these questions are of most interest to any trader.
If you translate Ichimoku Kinko Hyo into Russian, you get “ a glance at the equilibrium graph».
And this is how the indicator looks on the chart:
Description of the Ichimoku Kinko Hyo indicator
So, our indicator consists of the following indicator lines:
- Tenkan-sen;
- Kijun-sen;
- direct Senkou Span A;
- and the second Senkou Span B;
- well, Chinkou Span.
Let's consider each indicator separately ...
Tenkan-sen (aka Tenkan Sen)
The red line of Tenkan Sen is the “turning line”. Shows the average of the highest and lowest prices for the last 9 periods.
Kijun-sen (aka Kijun Sen)
The blue of the Kijun Sen lines is the main, main line. Indicates the average of the high and low prices over 26 periods.
Senkou Span A (aka Senkou Span)
Orange line Senkou Span: displays the average shifted value 26 periods forward between 2 lines:
- blue
- and red.
Senkou Span B (aka Senkou Span)
The second orange line communicates between the minimum and maximum price taken over the last 52 periods with a forward shift of 26 periods.
Chinkou Span (aka Chikou Span)
The green one of the Chikou Span lines is the "delay line". It displays the closing price of the current candle, which has a shift of 26 periods.
When the green line of the Chikou Span crosses the prices going upwards, you need to prepare to buy. Visually, it looks like this:
Figure 2. Buy signal for the Ichimoku indicator
If the price crosses from top to bottom, get ready to sell.
Figure 3. Sell signal for the Ichimoku indicator
Finally…
Now you know how to practice Ichimoku Kinko Hyo. Naturally, the variety of colorful lines that our indicator shows can seem confusing. But don't be afraid of this. Read the indicator description again to understand it properly. Who knows, maybe it will be for you. Moreover, its lines show not only support and resistance levels, but also the trend and further direction of the price.
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