Ichimoku Technical Indicator
Ichimoku is a Japanese charting technique that was developed before by a Japanese newspaper writer, with the pen name of Ichimoku Sanjin.
- Ichimoku means "a glance" or "one look"
- Kinko means "equilibrium" or "balance"
- Hyo is the Japanese word for "chart"
Thus, Ichimoku means, "a glance at an equilibrium chart". Ichimoku attempts to identify the likely direction of metals price & help the trader to determine the most suitable time to enter or exit the metals market.
Calculation
This metals indicator consists of five lines drawn using the midpoints of previous highs and lows. Five lines are calculated as follows:
1) Tenkan-Sen: Conversion Line: Red Line (Highest High + Lowest Low) / 2, for the last 9 metals price periods
2) Kijun-Sen: Base Line: Blue Line (Highest High + Lowest Low) / 2, for the last 26 metals price periods
3) Chikou Span: Lagging Span: Green Line Today's closing metals price drawn 26 metals price periods behind
4) Senkou Span A: Leading Span A = (Tenkan Sen + Kijun Sen) / 2, drawn 26 metals price periods ahead
5) The Senkou Span B: Leading Span B: (Highest High + Lowest Low) / 2, for the past 52 metals price periods, drawn 26 metals price periods ahead
Kumo: Cloud: area between Senkou Span A & B
Metal Analysis & How to Generate Trading Signals
Bullish signal - Tenkan-Sen crosses the Kijun-Sen from below.
Bearish signal - Tenkan-Sen crosses the Kijun-Sen from above.
However, there are different levels of strength for the buy & sell metals trade signals generated.
Technical Analysis in Metal Trading
Bullish crossover trading signal forms above the Kumo (clouds),
Very strong buy metals trade signal.
Bearish crossover signal forms below the Kumo (clouds),
Very strong sell metals trade signal.
If a bullish/ bearish crossover signal takes place within the Kumo (clouds) it is considered a medium strength buy or sell metals trade signal.
A bullish crossover that occurs below the clouds is considered a weak buy metals signal while a bearish crossover that occurs above the clouds is considered a weak sell metals trade signal.
Support and Resistance Levels
Support & resistance levels can be predicted by the presence of Kumo (clouds). Kumo can also be used to identify the current metals trend of the metals market.
- If metals price is above the Kumo, the prevailing market metals trend is said to be upwards.
- If metals price is below the Kumo, the prevailing market metals trend is said to be downwards.
Chikou Span or Lagging Span is also used to determine the strength of the buy or sell metals trade signal.
- If the Chikou Span is below the closing metals price of the last 26 periods ago and a sell short signal is given, then the strength of the metals trend is downwards, otherwise the signal is considered to be a weak sell metals trade signal.
- If there is a bullish signal and the Chikou Span is above the metals price of the last 26 periods ago, then the strength of the metals trend is to the upside, otherwise it is considered to be a weak buy metals trade signal.
