What is the ICHIMOKU indicator and how does it work? The answer in 6 points and in 6 min

Looking at this chart with the ICHIMOKU indicator "at a glance", your first reaction is a total incomprehension. Which is completely normal for an average person.

From its real name ICHIMOKU KINKO HYO, this technical indicator created in 1969 by the Japanese Goishi Hosada (1898-1982) first deserves to be analyzed linguistically. Indeed it is interesting to know that the word ICHIMOKU means in Japanese "at a glance". KINKO means "balance", and HYO means "curve".

Mr Goishi Hosada herefore wanted to create an indicator that was easy to read at first glance, and on any underlying, and in any time frame.

Now let's look at a chart with the ICHIMOKU indicator in detail, and break it down into 6 important points: 

Points 1,2,3 : ICHIMOKU is also named "Cloud Ichimoku". So let's start with the cloud composed with the Span A ( SSA=Senko Span A) and the Span B ( SSB=Senko Span B) and "Kumo" which means "cloud" in japanese.

As you can see, the price moves more easily into the thin areas of the cloud. Price often bounces or is rejected on the limits of the Span A ( the green line of the cloud) and Span B ( the red line of the cloud).

When Span A is above than Span B, the trend is bullish, and the cloud turns green.
And conversely, when Span B is above than Span A, the trend is bearish and the cloud turns red.

Points 4,5,6: Tenka, Kijun et Chiku.

TENKAN (=TS): named also "the small Kijun", corresponds to 50% of the high and low of the last 9 periods (Japanese candles).

If the gap is large between the price and the Tenkan, it means that the market is overbought or oversold. A future correction is possible in this case.

On this graph , the "Tenkan" is the closer take profit , on a retracement Fibonacci 50%, and some rebounds and downturns are possible on the Tenkan .

KIJUN (=KS): Corresponds to 50% of the high and low of the last 26 periods (Japanese candles).

If the gap is large between the price and the Kijun, it means that the market is overbought or oversold. A future correction is possible in this case.

On this graph, the "Kijun" is a potential take profit, on a retracement Fibonacci 50%, and some rebounds and downturns are possible on the Kijun.

CHIKU (=CS): it's the "lagging Span", because the Chiku correspond to the last closing price 26 periods back.

I will show you an example on what happens when the Chiku crosses the Tenkan. It's just fantastic.

Now let's see how it works on a graph, and which targets and rebounds or dowturns are possible .

EXAMPLE 1: DOW JONES (M1): Targets and take profits on Tenkan and Kijun (please read from the left to the right)

EXAMPLE 2: When "Chicku" crosses "Tenkan": Possible entries in the market (please read from the left to the right, and read the points 1,2,3):

To sum it up:

• The ICHIMOKU indicator is used to have a view of the market at a glance.
• But it is also used to locate supports and resistances thanks to its cloud and its Kijun and its Tenkan.
• Also, Ichimojku gives you the entry and exit points of the market, as well as the market strength and trend of the underlying on which you are trading.

I hope you liked and appreciated this short educative publication, which is very efficient, believe me. Furthermore, I invite you to make some back testings on any underlying. You will be shocked. 100% sure. ;)

And please, remember that knowing an indicator or a tool for technical analysis is good, but knowing how to use, interpret and read it correctly is much better.

Be safe and good trades .

For more details, you can contact me here by email, or on the following networks:

LinkedIn: http://linkedin.com/in/james-d-touati-941a8ba6 

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