A Tool in the field of chart analysis, the Ichimoku-Kinko-Hyo-indicator. He is also the Ichimoku cloud well-known indicator and is used for the assessment of the market situation as well as possible Support and Resistances. This article would like to introduce him in more detail.
The inclined reader, it is noticed: The analysis by Thomas Hartmann, the head behind the trading school cryptographers, and very often refer to the Ichimoku-Kinko-Hyo-indicator. Certainly not everyone will be able to do anything about it. Therefore, this article aims to explain the indicator, as we did with the RSI and MACD.
What is the Ichimoku-Kinko-Hyo-indicator?
The Ichimoku-Kinko-Hyo-indicator, also by the shorter name of Ichimoku cloud is known, an indicator, with the help of the market sentiment as well as important Support and/or Resistances should be named. It consists of various lubricants. This indicator was introduced in 1968 by the Japanese journalist Goichi Hosada to the Public. Together with students he worked, however, since the thirties to this indicator. Quickly used Japanese traders and analysts this indicator. Until the West arrived, but it took something.
The above image shows the chart candles only the Ichimoku cloud. At first glance, it is striking that the Ichimoku-Kinko-Hyo-indicator is relatively complex and composed of different sub-lines. Let’s look at this in more detail!
Meaning of the individual lines
Dark blue is the Conversion Line, to Japanese as the Tenkan-sen is known. It is a kind of moving average, the average from the High of the last nine days and the Low will be in the same time period formed. Nine days is the default value that will be discussed later again. The Conversion Line is a measure of the market trend. This function as a signal line is the primary Use Case. It does not apply as the dominant Support or Resistance line.
Orange is the Base Line or in Japanese Kijun-sen. It is similar to the Tenkan-Sen, and the average from the 26-day is High and the 26-day Low. The Kijun-Sen is, therefore, a carrier as the Tenkan-sen. It can be used Loss, as a Stop, because it represents a Support or a Resistance. If the price is above the Kijun-Sen, this is a bullishes Signal, he falls beneath it, a lot of bids due soon Signal.
Green is the Lagging Span , or Chikou Span. It represents the course or the Close values of the daily candle, however, the values are shifted by 26 days in the past. The Chikou Span on the 9. July is so high as of today’s Close value.
The Kumo cloud: The heart of the Ichimoku-Kinko-Hyo-indicator
The red and green-colored area in the Chart. He is also the most famous part of the Ichimoku cloud. This cloud is for a signal generator. If the price is above the cloud, the overall Trend is bullish, and below the Kumo cloud deck of course is bearish. The price is within the cloud, the price currently is moving sideways.
Specifically, two lines in the Chart, the purple and the red line form the Kumo cloud. Also, these lines are sub-indicators.
Violet is the Lead 1, also known as Senko Span A is known. The value is calculated as the average of the Tenkan-Sen and Kijun-Sen, and with an Offset of 26 days in the Chart listed. This means that the Senko Span A is sufficient for 26 days in the future. The Senko Span A forms a part of the limit for the so-called Kumo-cloud.
Red finally, the Lead 2. Analogous to the Lead 1 is referred to as a Senko Span B is known. Similar to the Tenkan-Sen and Kijun-Sen this is an average of the Maximum of the last 52 days and the Minimum in the same period of time. As the Senko Span A is this sub-indicator with an Offset of 26 days in the Chart. Together with this, the Senko Span B forms the edge of the Kumo cloud.
Of Lead 1 rises above the Lead 2, the upward movement of travel, falls Lead 1 Lead 2, the same is true for the downward movement. For this reason, the cloud is in the first case, green, in the second case, colored red.
Trading with the cloud
With the Ichmoku-Kinko-Hyo-indicator, the interested Trader has a ton of information about short – term and medium-term rate estimates. In addition, many of the lines, among other things, also Lead 1 and Lead 2, as a Support and Resistance can apply. However, Ichimoku can do even more: If Kijun-Sen, the Tekan-Sen above the Kumo cloud being overtaken has to do it with a strong buying signal. He does this in the cloud with a medium and under the cloud, with a weak buy signal.
For sell signals you can apply these rules: If the Kijun-Sen under the Tegan-Sen above the Kumo cloud, the sell signal is weak, he does this under the Kumo cloud is a strong sell signal.
More traders to trade with the other sub-indicators: The Cross of course and Kijun-Sen, the outbreak from the course from the Kumo cloud, the change in colour of the cloud, or the Cross of course, and Chikou Span can be used as buy or sell signals are used.
Finally, a special feature is still the Kumo-to-call cloud: Since this is calculated with an Offset of 26 days, one can estimate the Supports and Resistances for almost a month. These values may change, of course, but provide a base from which to Find entry points, Targets or Stop Losses.
Which means the right?
Where are the used periods? For the Tenkan-Sen, it was noted that the nine days represent a default value. For him, as well as the 26 days and 52 days there are quite reasons: at the time of the development of the Ichimoku-Kinko-Hyo-indicator was the Six-day-a-week. Nine days and a half weeks were so, 26 is the number of Trading days corresponded in a month, and 52 finally, two months – excluding the Sundays.
This is really on crypto-currencies transferable? Many argue that the crypto market 24/7 is open. This should be reflected in the periods in which the analysis is based. Based on the above analysis, the periods are correct to ten days, thirty days and 60 days. Some smoothing of the indicator development by a multiplication with a factor of two.
Here one can argue in both directions. On the one hand, the Change in the periods for a constantly open market sounds attractive, on the other hand, it is always advantageous to work with the Indikatorset, which is commonly used. Surely you can bring here a little bit about things like Backtesting. This, however, would be beyond the scope of this article, but perhaps in it’s own.
Indicators are not crystal balls
We have learned the origin of the Ichimoku-Kinko-Hyo-indicator, and can now name the different sub-indicators. I also hope that I was able to represent signals how to interpret. It is always important to capture: indicators, regardless of whether a moving average, a MACD or Ichimoku cloud, are downstream indicators. Use only data from the past – from the future is not already. Similarly, here, as in all other indicators: you can help in the formulation of trading strategies, but not the future. If you observe, you can Find the entry point, Target and Stop a huge help Loss but!