Trade Gold Trading

Ichimoku Indicator

Ichimoku is a Japanese charting technique that was developed before by a Japanese newspaper writerjournalisteditor, with the pen name known of as Ichimoku Sanjin.

  • Ichimoku meaning: 'a glance' or 'one look'
  • Kinko means 'equilibrium' or 'balance'
  • Hyo is a Japanese term for "chart"

Thus, Ichimoku means, 'a glance at an equilibrium chart'. Ichimoku attempts to identify the likely direction of price & help the gold trader to determine the most appropriate time to enter or exit the market.

Ichimoku Kinko Hyo for Gold: Indicator Usage

Calculation

This indicator has five lines that are drawn using the middle points of highs and lows from the past. The five lines are figured out like this:

1) Tenkan-Sen (Conversion Line): Represented by the Red Line, calculated as (Highest High + Lowest Low) / 2 over the preceding nine price bars.

2) Kijun-Sen: The Base Line: Blue Line (Highest High + Lowest Low) / 2, for last 26 price periods

3) Chikou Span (Lagging Span): Shown in Green. Calculation: Today's closing price projected 26 price bar periods back in time.

4) Senkou Span A: Calculated as the mean of the Tenkan Sen and Kijun Sen, projected forward by 26 trading periods.

5) Senkou Span B: Leading Span-B: (Highest High + Lowest Low)--/--2[Highest High + Lowest Low]--/--2, which is derived from the previous 52 pricing periods and plotted 26 price bars ahead.

Kumo: Cloud: area between Senkou Span A and B

Gold Analysis and Generating Signals

Bullish trading signal - Tenkan-Sen crosses Kijun-Sen from below.

Bearish trading signal - Tenkan-Sen crosses the Kijun-Sen from above.

However, there are different levels of strength for the buy & sell trading signals generated.

Ichimoku Kinko Hyo Indicator - How to Use with Ichimoku Indicator

Analysis in XAUUSD Trading

Bullish cross-over signal forms above the Kumo (clouds),

Strong buy signal.

Bearish cross-over signal occurs below the Kumo (clouds),

Strong sell signal.

If a bullish/ bearish crossover signal takes place within the Kumo (clouds) it's considered a medium strength buy or sell signal.

A bullish cross-over that occurs below the clouds is considered a weak buy signal while a bearish crossover that occurs above the clouds is regarded a weak sell signal.

Support & Resistance Zones

We can guess where support and resistance are based on the presence of Kumo (clouds). Kumo can also show us the market's current overall direction.

  • If the price is above the Kumo, ruling market trend is said to be upward.
  • If the price is below Kumo, ruling market trend is said to be downwards.

The Chikou Span, also referred to as the Lagging Span, serves to gauge the strength of a buy or sell indication.

  • If the Chikou Span indicator is below the closing price of the last 26 periods ago & a sell short sell signal is generated, then the power of the trend is downward, otherwise the trading signal is regarded to be a weak sell signal.
  • If there's a bullish signal & the Chikou Span is above the price of the last 26 periods ago, then the power of the trend is to the up side, otherwise it's considered to be a weak buy signal.

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