Trade Gold Trading

Ichimoku Kinko Hyo Indicator

Ichimoku Kinko Hyo is a Japanese charting technique that was created 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 Kinko Hyo means, "a glance at an equilibrium chart". Ichimoku attempts to identify the likely direction of crude price and help the trader to determine the most suitable time to enter or exit the crude trading market.

Calculation

This indicator consists of five lines drawn using the midpoints of previous highs & lows. Five lines are calculated as follows:

1) Tenkan-Sen: Conversion Line: Red Line (Highest High + Lowest Low) / 2, for last 9 price periods

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

3) Chikou Span: Lagging Span: Green Line Today's closing crude price drawn 26 price periods behind

4) Senkou Span A: Leading Span A = (Tenkan Sen + Kijun Sen) / 2, plotted 26 price periods ahead

5) Senkou Span B: Leading Span B: (Highest High + Lowest Low) / 2, for the past 52 price periods, drawn 26 price periods ahead

Kumo: Cloud: area between Senkou Span A and B

Technical Analysis and How to Generate Signals

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

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

However, there are different areas of strength for the buy and sell crude trade signals generated.

Technical Analysis in Oil Trading

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

Very strong buy signal.

Bearish crossover signal forms below Kumo (clouds),

Very strong sell signal.

If a bullish/ bearish cross-over signal takes place within the Kumo (clouds) it is considered a medium strength buy or sell signal.

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

Support and Resistance Levels

Support and resistance zones can be predicted by the presence of Kumo (clouds). The Kumo can also be used to identify the current trend of the crude trading market.

• If crude price is above the Kumo, the prevailing market trend is said to be upwards.
• If crude price is below the Kumo, the prevailing market trend is said to be downwards.

The Chikou Span or Lagging Span is also used to determine the strength of the buy or sell signal.

• If the Chikou Span is below the closing crude price of the last 26 periods ago and a sell short signal is given, then the strength of the trend is downwards, otherwise the signal is considered to be a weak sell signal.
• If there is a bullish signal and the Chikou Span is above the crude price of the last 26 periods ago, then the strength of the trend is to the upside, otherwise it's considered to be a weak buy signal.