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Ichimoku Kinko Hyo - The Most Underrated Indicator (e.g. NAS100)Welcome to my first educational post. This is a big one, Ichimoku Kinko Hyo is the most underused, underrated, least understood and yet most powerful trend indicator available to the general public. I'll first briefly describe the 4 components: - Tenkan Sen (turning line): it's like a small period moving average but calculated slightly differently. So if price breaks it, it's a first signal of a trend reversal but always wait for the retest. - Kijun Sen (standard line): it's like a larger period moving average but like the Tenkan it's calculated differently. One interesting note is that when it flatlines it represents the 0.5 fib level of the current range. Together, they are used for crossovers just like classic moving averages. - Kumo (Cloud): which is composed of 2 special moving averages called the Senkou Span A and the Senkou Span B. Generally serves as a support/resistance zone and is also subject to crossovers that can confirm reversals (not signal) since it is too slow to signal them. The thicker the cloud the stronger the trend and vice versa. - Chikou Span (Lagging Span): Mirrors current price action 26 periods in the past. In simple terms, it puts things into perspective and can detect potential blocking points for price. Here is a case study of the NAS100 and monthly Ichimoku: What do we see? (Follow the steps) 1) Price breaking the Tenkan and retesting it twice. This is already a major bearish signal. 2) Following the Tenkan break, price doubled down and broke the Kijun + retested it TWICE! A strong bearish confirmation that the downtrend will continue. 3) The Tenkan/Kijun crossover, this is like a death cross of MAs (look it up). 4) This is a reversal signal. You'll notice how price never touched the cloud again. The monthly Ichimoku really puts things into perspective. It really enables you to see the bigger picture and that it is okay to buy in a bear market. You just have to let it guide you. 5) First confirmation of the reversal: the break of the Tenkan + retest. 6) Second confirmation of the reversal: the break of the Kijun + no retest was even needed. 7) 'Golden cross', the Tenkan/Kijun crossing over which is the third confirmation and that price is simply extremely bullish. 8) The Chikou Span breaking past price. This is similar to price breaking a resistance level, it gives the same kind of signal. This is the final bullish confirmation. This a very summarised explanation of how the Ichimoku Kinko Hyo indicator should be used BUT if you want to learn more about it, I strongly suggest you read the book by Karen Péloille: Trading With Ichimoku, A Practical Guide to Low-Risk Ichimoku Strategies. As always, have a lovely Sunday and happy trading! ;)
FX:NAS100Education
by Lexi_Is_Trading
3
Ichimoku Cloud Demystified: A Comprehensive Deep DiveHello TradingView Community, it’s Ben with LeafAlgo! Today we will discuss one of my favorite indicators, the Ichimoku Cloud. The Ichimoku is a versatile trading tool that has captivated traders with its unique visual representation and powerful insights. We will dive deep into understanding the Ichimoku Cloud, explore its history, discuss its parts, highlight real-life examples, and address potential pitfalls. By the end of this article, we believe you will know how to leverage the Ichimoku Cloud effectively in your trading endeavors. Let’s dive in! Origin of The Ichimoku Cloud The Ichimoku Cloud, also known as Ichimoku Kinko Hyo, was developed by Goichi Hosoda in the late 1930s but was not published until later in the 1960s. Its name translates to "one glance equilibrium chart," reflecting its ability to provide a holistic view of market dynamics with a single glance. Over time the Ichimoku Cloud has become a popular trading tool among new and seasoned traders. Components of The Ichimoku Cloud Some traders believe the Ichimoku cloud is a complex jumble of lines with no rhyme or reason, but this is not necessarily true. The best way to understand the Ichimoku cloud is to break it down into its respective parts. Each element contributes to the overall interpretation of price action, trend direction, support and resistance levels, and potential entry and exit points. The Ichimoku Cloud has five components: Tenkan-sen, Kijun-sen, Senkou Span A and B, and Chikou Span. The Tenkan-sen and Kijun-sen, often called the Conversion Line and Base Line, respectively, are essential in identifying trend direction and momentum. Below we can see a bullish signal happens when the Tenkan-sen crosses above the Kijun-sen. Conversely, a bearish signal occurs when the Tenkan-sen crosses below the Kijun-sen. Typical length inputs for the Tenkan-sen and Kijun-sen are 9 and 26. The Senkou Span A and B form the cloud or "Kumo." These components serve as dynamic support and resistance levels, with Senkou Span A calculated as the average of the Conversion Line and Base Line and Senkou Span B representing the midpoint of the highest high and lowest low over a specified period, typically 52. The cloud's thickness and color provide visual cues for potential market strength and volatility. The Chikou Span, or the Lagging Span, is the current closing price plotted 26 periods back on the chart. It helps traders gauge the relationship between the current price and historical price action, providing insights into potential trend reversals or continuation. Putting the parts together gives us a complete picture of the Ichimoku Cloud. Each aspect contributes to the one-glance equilibrium theory, giving traders a more holistic view of price action. Applying the Ichimoku Cloud in Trading We now better understand all parts of the Ichimoku cloud, but that means little if we don’t understand how it can be utilized in trading. Let's explore examples that demonstrate the practical application of the Ichimoku Cloud: Example 1: Trend Following In an uptrend, we would look for the Tenkan-sen to cross above the Kijun-sen while the price remains above the cloud. When the price retraces to the cloud, a long position opportunity may arise, with the cloud acting as support. The Chikou Span should also be above the historical price action, confirming the bullish sentiment. Example 2: Trend Reversals and Breakout Opportunities A potential trend reversal or continuation can be identified when the Tenkan-sen crosses above the Kijun-sen and the price moves above the cloud. A breakout trade can initiate when the price breaks through the cloud's upper boundary, indicating a shift in momentum. For the Ichimoku cloud to give its strongest confirmation of a reversal, some traders will take a fairly conservative approach and wait for a few things to occur. Traders typically wait for a kumo twist, the Tenkan-sen/Kijun-sen cross, and the Chikou Span to break the cloud and be above the price. The reverse of these signals can be used in the same fashion for a short position. Example 3: The Kumo Twist In a trend, a Kumo Twist can signal a potential trend reversal. Look for the Senkou Span A to cross above or below the Senkou Span B within the cloud. This twist can confirm a shift in market sentiment. Traders can enter a position when the twist is confirmed, placing a stop loss above or below the cloud or the recent swing high/low. I think of the Kumo twists and subsequent clouds as a trend filter. Placing longs on the bullish side or shorts on the bearish side, however, some traders use the Ichimoku Cloud in a contrarian fashion. Contrarian trades can be profitable using this method as price tends to pull back to the clouds A or B span where support or resistance may lie. Pitfalls and Challenges: Avoiding Common Mistakes While the Ichimoku Cloud is a powerful tool, it is paramount to be aware of potential pitfalls. Here are a few challenges to navigate: False Signals and Choppy Market Conditions In ranging or volatile markets, cloud signals may generate false indications. During such periods combine the Ichimoku Cloud with other technical indicators or wait until the market picks a direction. Moving out to higher time frames can help clear the murkiness of consolidation phases and provide a clearer picture of the trend, in turn, weeding out false signals. Overcomplicating Analysis The Ichimoku Cloud provides a wealth of information, but it's crucial to maintain simplicity and focus. Avoid overcrowding the chart with an abundance of indicators, especially other overlays. It is easy to get lost in the sauce or run into redundancies with too much on the chart. Testing and Adapting Each market has its characteristics or volatility, and it's essential to backtest the Ichimoku Cloud strategy, experiment with different parameters, and adapt to market conditions over time. Many traders rely on the standard settings, but in my time developing trading algorithms, I have learned that those settings do not hold from market to market or consistently over time. It is critical to regularly revisit your settings or overall trading strategy to make sure you are drawing on the best available information the Ichimoku Cloud can give. Enhancing the Ichimoku Cloud Strategy To enhance your understanding and utilization of the Ichimoku Cloud, consider the following: Incorporating Other Technical Indicators Combining the Ichimoku Cloud with other indicators, such as oscillators, to confirm signals can be beneficial. I know I said not to over-clutter your chart with other indicators, but that is a rule of thumb more set for overlays. Timeframe Considerations Adapt the Ichimoku Cloud to different timeframes based on your trading style. Higher time frames may provide more reliable signals, while lower timeframes may offer shorter-term opportunities. I don’t believe it ever hurts to back out a few time frames to get a clear picture of market dynamics and avoid tunnel vision. Conclusion The Ichimoku Cloud is a versatile indicator, and today we scratched the surface of how it can be appropriately used. Remember, practice, patience, and continuous learning are critical for refining your skills and adapting the Ichimoku Cloud strategy to ever-evolving market conditions. If there is anything unclear or you have any questions, please don’t hesitate to comment below. Trading education is our passion, and we are happy to help. Happy trading! :)
Editors' picks
Education
by LeafAlgo
49
Ichimoku Target Price Theory V, N, E and NT CalculationsTHE BASICS: Here is a close up of the Ichimoku Kinkō Hyō indicator: Many people do not know that the Ichimoku Kinkō Hyō cloud system has its own Number, Wave, Target Price and Timespan Theories. After years of study, the numbers that Goichi Hosoda choose for his system are 9, 17, 26 as the basic numbers with 33, 42, 65, 76, 129 and 200~257. These numbers are used in the timespan as well as on the indicator itself. 9 is used for the Conversion Line (Tenkan Sen) 26 is used for the Base Line (Kijun Sen) 26 is also used for the Lagging Span (Chikou Span) and is used to shift the current price back 26 periods. The Lagging Span (Chikou Span) is an exceptional part of the system and allows you to see possible support and resistance levels without drawing any lines. The Leading Span A (Senkou Span A) is calculated using the Conversion Line (Tenkan Sen) and Base Line (Kijun Sen) values and is then plotted 26 periods into the future and shows potential future support and resistance levels. The Leading Span B (Senkou Span B) is calculated using double of 26 so 52 periods and is then and is then plotted 26 periods into the future. This also shows potential future support and resistance levels. Note that: The Area ABOVE the cloud is called the BULLISH ZONE. The Area BELOW the cloud is called the BEARISH ZONE. The Area IN BETWEEN the Leading Span A (Senkou Span A) and Leading Span B (Senkou Span B) levels is called the EQUILIBRIUM ZONE. Note that the Conversion Line (Tenkan Sen) and Base Line (Kijun Sen) ARE NOT MOVING AVERAGES but are instead calculated high and low midpoints of the price. So the Conversion Line (Tenkan Sen) is high and low calculated midpoint for the last 9 Periods (short-term) and the Base Line (Kijun Sen) is high and low calculated midpoint for the last 26 Periods (mid-term). THE ADVANCED: Ichimoku Kinkō Hyō Target Price Theory with examples: How accurate is Goichi Hosoda’s Target Price Theory? Using the history of the DJI/USD chart….. it turns out the calculation are very accurate. Note that i have added in timespans from Hosoda’s numbers to see if there is a day of change on the Ichimoku numbers 9, 17, 26, 33, 42, 65, 76, 129 and 200~257. Note that you can be flexible with these numbers so if a day of change is 8 days instead of 9 or 77 days instead of 76 then that is fine with this system. Ichimoku System has 4 Price Target Calculations called V, N, E and NT. A few of these we will see below. As you’ll see below, the calculations do change if they are POSITIVE or NEGATIVE. If we look at the Positive N Calculation from the Monday 3rd August 1896 until Monday 6th sept 1897 we can see that it was spot on. N Calculation positive N = C + (B-A) = D (B) $32.55 - (A) $20.77 = $11.79 (C) $27.79 + (B-A) $11.78 = (D) $39.57 The actual price it went to was $40.41 If we look at the above Negative V Calculation from the Monday 29th Sept 1929 until Monday 5th sept 1931 we can see that again, the calculation was spot on. V Calculation Negative V = B - (C-B) = D (C) $302 - (B) $194 = $108 (B) $194 - (C-B) $108 = (D) $86 The actual price it went to was $85.76 and continued to $40.72 If we look at this Negative N Calculation from the Monday 9th November 1931 until Monday 30th May 1932 we can see that again, it was almost spot on. N Calculation Negative N = C - (A-B) = D (A) $118.86 - (B) $69.85 = $48.75 (C) $89.87 - (C-B) $48.75 = (D) $41.12 Actual = $43.52 and continued to $40.72 If we look at the Positive V Calculation from Monday 4th July 1932 until Monday 17th July 1933 we can see that again, it was almost spot on. V Calculation Positive V = B + (B-C) = D (B) $81.63 - (C) $48.81 = $32.82 (B) $81.63 + (C-B) $32.82 = (D) $114.45 Actual = $110.90 If we look at the Negative V Calculation from Monday 4th Nov 1940 until Monday 13th April 1942 we can see that again, it was almost spot on. V Calculation Negative V = B - (C-B) = D (C) $131 - (B) $114 = $17 (B) $114 - (C-B) $17 = (D) $97 Actual = $92.60 If we look at the Positive NT Calculation from Monday 23rd March 2020 until Monday 10th May 2021 we can see that again, it was spot on. NT Calculation Positive NT = C + (C-A) (C) $26,114 - (A) $18,217 = $7,897 (C) $26,114 + (C-A) $7,897 = $34,011 Actually price went up to $36,971 which was until Monday 3rd Jan 2022. If we look at the Negative V Calculation from Monday 12th Dec 2022 until Monday 13th March 2023 we can see that again, it was close but off from about $600 but still would’ve made a profit. V Calculation Negative V = B - (C-B) = D (C) $34,344 - (B) $32,582 = $1,762 (B) $32,582 - (C-B) $1,762 = (D) $30,820 Actual price went to = $31,428 I have done these examples on the 1 week chart but this system also work for lower timeframes. I could go through and add much more calculations but i think you get the point with just these few. I hope this post has been helpful and insightful. For those interested, below are 2 links to my previous post about Ichimoku Kinkō Hyō that you may find helpful. Ichimoku Wave Theory: Ichimoku Crypto:
TVC:DJIEducation
by entertheroach
2
Tricks of Ichimoku clouds. Hi. I was making a comment in someone else's idea about the Ichimoku indication and thought one point should be dealt with more. So, let's assume something are in a down-trend, candles are flying down from cliff, to the left of Kijun-sen and Tenkan-sen. We can see this on chart 1. At some point the drop reaches some kind of resistance and starts some lateral movement of larger or smaller amplitude. Kijun and Tenkan are beginning to squeeze each other, traders are waiting for the long-awaited (after so many months!) of a golden cross, but something else is happening. A cross occurs, but it looks like it is not Kijun-sen piercing Tenkan-sen from below, but vice versa Tenkan sen approaching Kijun has taken and fallen into this line and is looking down. So... Let's remember what the textbook golden cross looks like on Ichimoku? I believe what is shown on screen 2 is exactly that golden cross. Kijun come over in from below Tenkan-sen, and shot through the line. The Tenkan-Sen did not change its horizontal position in this process. Then it is required to see if there are situations, when a golden cross should form, but in fact Tenkan-sen is falling down to the Kijun and the movement is going downward still, and one more cross is formed soon. Voila, the summer 2021 chart of Etherium. This is exactly the situation. Conclusion: Not every Kijun/Tenkan line cross after the big red Kumo cloud is a golden cross. I encourage @norok as a trader whom I have great respect for his work, to comment on these aspects.
BITSTAMP:BTCUSDEducation
by averkie_skila
A Comprehensive Guide to the Ichimoku CloudHello traders, in this post, we will be talking about how to trade using the Ichimoku Cloud. This is one of the most common, yet very effective and unique indicators to date and is prized by many traders as it foreshadows possible support and resistance levels. ------ What is the Ichimoku Cloud Indicator? The Ichimoku Cloud indicator is an extremely versatile indicator that can help define possible support and resistance levels. It helps identify not only the support and resistance, but also provides data to help identify the overall direction of price, give a good idea on the momentum of price action, and can be used strictly alone as a trading signal - if used properly. Even though the Ichimoku may seem complicated, it is actually rather a very straightforward indicator. The concepts are easy to understand and the signals are well defined. The Ichimoku indicator takes multiple averages and plots them on the chart that uses the figures to compute a 'cloud' which attempts to forecast where the price may find support or resistance in the FUTURE. The keyword here is future. This is one of the few indicators that can actually give you possible support in the future and present time. The Ichimoku has 5 simple components: 1) Conversion Line 2) Base Line 3) Lagging Span 4) Leading Span A (this is what creates the cloud) 5) Leading Span B (this is what creates the cloud) Conversion Line: - On it's own, the conversion line shows the short-term price momentum - The mid-point price over the last 9 periods (which is also the default value) - An area of minor support or resistance The market price above the conversion line shows the possible short-term upward momentum, allowing the trader to focus on buy signals. If the price is below the conversion line, it would signal short-term downward momentum, and just like when it trades above, you would want to find sell signals when it trades below the conversion line. The conversion line is not typically used on its own, but rather used in conjunction with the other components of the Ichimoku as listed above in the 5 components. Base Line: The Base Line shows the support and resistance levels on the medium timeframe. The midpoint of the high and low price is calculated over the last 26 periods within the chart. Just like the conversion line, on its own, can be used to find price momentum. If the price is above the base line, it means it is trading above the 26 period midpoint, and therefore has an upward bias. Vice versa when price is below the base line. Unless there is a very strong trend, the base line will often not be near the price. When the base line is often near or intersecting (crossing) with the price, it isn't helpful to determine the trend direction. Lagging Span: The Lagging Span is created by plotting closing prices 26 periods behind the latest closing price of an instrument. It is designed to allow traders to VISUALIZE the relationship between the current and prior trend, as well as to spot potential trend reversals. One of the key ways to use the Lagging Span is to view its relationship to the current price. When the price is below the lagging span, this is usually an indication that there is a trend within the price and can indicate that it will move higher. When the price is trading below the lagging span line, this is often an indication that there is WEAKNESS within the price. If the lagging span line is about to cross above the prior price line, this can be a confirmation of a bullish signal. If the lagging span line is crossing below the price, this can indicate the opposite, a bearish signal. Any interaction with the past price line is an indication of a choppy or sideways market and if a lagging is descending quickly into a past price line, it could be a sign of exhaustion for price. Kumo Cloud (or Cloud for short): The Kumo Cloud is formed via two lines, the Leading Span A, and the Leading Span B. The Kumo Cloud gives traders support and resistance levels that can be projected into the FUTURE. Not many indicators can give a price projection based on the future. It is very different from many other indicators because it provides support and resistance levels for the current data and time taken into account. Moving averages, for example, only give the present and past data as possible support and resistance, and doesn't give any indication of possible future support or resistances. The uptrend is indicated via a green cloud as shown in the chart above. The uptrend is strengthened when the leading Span A (green cloud line) is rising and is above the Leading Span B (red cloud line). Conversely, a downtrend is produced when the Leading Span A is BELOW the Leading Span B line - which creates the red cloud. As stated above, the Kumo cloud is shifted forward 26 periods that provides future support and/or resistance. If the cloud is THICK = STRONG Support/Resistance If the cloud is THIN = WEAK Support/Resistance If the price is above the cloud, then there is enough of a trend to be in place that provides buying opportunities. If the price is below the cloud, then it's considered to be under selling pressure that can help provide sell signals. The longer the price action stays above or below the cloud, the stronger the trend and the more support/resistance the cloud offers. The Kumo Cloud is suitable for long term traders as well as for trend/momentum traders. When combined with the MACD, for example, which is another momentum indicator, can provide high probability results. The price relationship to the cloud can be defined as when the father the price action is from it, the stronger the trend and more volatile it can be. You want to avoid trading inside of the Kumo Cloud as it usually means that the market is indecisive. Settings for the Ichimoku: The Ichimoku relies on only three different time periods in the calculation: 9, 26, and 52. The reason is because the Japanese markets used to be open for six days of the week, meaning that the number 9 represented a week and a half of trading. 26 equals the number of trading days in a typical month (30 minus four Sundays), and 52 equals two months of trading days. Japanese markets now only trade 5 periods per week - so some practitioners of the Ichimoku suggest revising the settings to: 7, 22, and 44. In my personal experience, however, the traditional values of 9, 26, and 52, have performed far better. Limitations: The Ichimoku, of course, does have its limitations. The indicator can make the chart look incredibly busy with all of the lines. To help remedy this, depending on your trading needs, certain lines can be removed. It can actually be helpful to remove the lines, and keep only the cloud. In conclusion, just focus on which lines provide the most information for you as a trader, and then consider hiding the rest of the lines as they can be often distracting. The cloud limitations can also become irrelevant for long periods of time, as the price remains way above or below it, At times like these, the conversion line, base line and their crossovers, can then, also, become more of an importance as they generally stick closer to the price. Here is an example of when we remove all of the lines, only keeping the cloud and the leading spans:
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BITSTAMP:BTCUSDEducation
by XForceGlobal
171