Ichimoku ( of Ichimoku the Kinko Hyo ) or as it is called "equilibrium chart" to determine the foreign exchange market Forex transaction is likely to make a profit , but the Ichimoku Cloud serves as a filter of information chaos .
The trading terminal Metatrader 4 This forex indicator called Ichimoku Kinko Hyo
This method of trading is still not familiar bulk of traders, but its popularity is growing. Efficiency Indicator Forex Ichimoku confirmed by multiple tests on the forex market, it combines three forex indicator on the same chart, which ultimately gives us a ready-made trading system that does not require any more forex indicators and allows for this trader to make the right decisions at the conclusion of the transaction, because the trader becomes more informed, applying it.
Introduction to Ichimoku
This forex indicator describes the behavior of prices in the market from different angles, making it possible to find a deal with a high probability of success. Although many FOREX traders, this indicator tends to scare the abundance of "any" lines on the chart, but the forex indicator components can be easily translated into a much more familiar look.
So Ichimoku indicator consists of 4 main components that help the forex trader to understand the behavior of prices in the currency market forex.
Let us first consider the Tenkan line and the Sen the Kijun . They represent a nothing more than a 20-and 50-day moving averages, although with a slightly different time scales.
1. Line the Sen the Tenkan - represents the sum of the highest high and the lowest low in the chart, divided by two. Line Tenkan Sen calculated over the preceding 7-8 candles on the chart.
2. Line the Sen Kijun - also represents the sum of the highest high and the lowest low in the graph divided by two, but the Kijun line is calculated for the last 22 candles on the chart.
To open a trading position in the chosen currency pair, the trader is looking for the intersection of these lines - which is similar to moving average (Moving Averages).
In Figure 1, we see a clear intersection of the line Tenkan Sen (black line on the chart) and line Kijun Sen (red line on the graph) at the point defined as the «X». This signal tells us that the price will soon fall down .
Forex Strategy "Trading Ichimoku" - the intersection of the lines
Figure 1 - Crossing the Ichimoku lines
And now I propose to consider the most important component of Ichimoku indicator - a "cloud", which is a current and historical behavior of prices in the market. Ichimoku Cloud is behaving much the same way as a simple line of support and resistance, creating barriers .
Ichimoku Cloud is formed of two main components:
3. Line Senkou Span A - calculated as the sum of the lines Tenkan Sen and Kijun Sen, divided by two. The calculation takes 26 last closed candles.
4. Line Span of the Bed and of Senkou - calculated as the sum of the highest high on the chart, and the lowest low divided by two at the same time. The calculation takes the past 44 candles and closed as they are shifted by 22 candles forward in time.
The area between the lines is called Kumo, or "Ichimoku cloud". A wide Ichimoku cloud gives the trader a very good filter. This cloud allows you to take into account the volatility of the currency pair in the market . The breakthrough rates through the Ichimoku cloud and the subsequent move above or below it, indicates the trader a better and more likely to bargain .
Examples refer to Figures 2 and 3.
For example, the currency pair USDCAD we see a tangible difference between the two price charts. Although we are seeing a clear support at 1.1522 on the usual us chart (see Figure 2), then the price is testing this level again. At this point, some of the inmates of the transaction can be knocked out of the market by stop-loss since price pulls back in the opposite direction. But, on the example of the Ichimoku indicator (see Figure 3) Ichimoku cloud is for us a great filter. Taking into account the volatility of the market, the Ichimoku cloud gives you a better opportunity to trade the break of 1.1450. In this case, the price is not rolled back, holding the bargain pulse downtrend.
Forex Strategy "Trading Ichimoku"
Figure 2 - A classic breakout level of support and resistance levels
Forex Strategy "Trading Ichimoku"
Figure 3 - Ichimoku indicator provides the best opportunity for a breakthrough application
Finally, the last component of Ichimoku indicator - Span of the Chikou . Imaging mood in the currency market , Chikou is the price on the market at the time of closing, shifted with 22 periods ago. This characteristic indicates the sentiment of the forex market, while showing the main trend in relation to the existing at the moment the price momentum . The point is simple: if the currency market is dominated by sellers, Chikou Span line will be lower and fluctuate the price on the chart, and also vice versa - as in trading on the currency pair will lead buyers, Chikou Span line rises above the price chart.
Trading Strategy "Trading Ichimoku"
Figure 4 - Chikou line helps determine the sentiment of the currency market
Now let's put all together:
Let's try to understand the best way to trade using the Ichimoku indicator - "cloud technique".
The strategy of "trading on Ichimoku"
Figure 5 - The lines tell us everything
Here is an example - the USDJPY in Figure 5 and slightly increase the scale of the image - as a result see Figure 6. From the beginning, the currency fluctuated in a range of prices between 116 and 119, as Forex traders were waiting for a breakthrough on the market. For as long as the market traded sideways, Ichimoku cloud acted as a support-resistance for prices in the market. Having determined this, we turn to the lines Tenkan and Kijun Sen. And as mentioned earlier, these two indicator lines work like moving average, where Tenkan line is a greater short-term average, and the Kijun line - the main line moving. As a result, as soon as the Tenkan line falls below the Kijun line, we get a trading signal about the possible reduction of prices on the market. But as long as the intersection is in the cloud at point A in Figure 5, and so the signal is not unique. To trader could think about entering the market signal for the transaction must be located outside the Ichimoku cloud . We can confirm this downward trend in the market using Chikou Span, which at this point remains below the price graph. On the other hand, if Chikou line is above the price chart, it would tell us about the boosts sentiment. Combining all this together - now we will look for an opportunity to open a trading position to sell at our chosen currency pair.
Trading with Ichimoku
Figure 6 - Entering the market is located immediately below the Ichimoku cloud.
Because we equate the Ichimoku cloud support levels Lieb resistance , then before opening any trading position for sale, we need to make sure that the closing of the trading session happened below the Ichimoku cloud . The result - the open position at point B on our chart. In this case, we have a confirmed break of the Ichimoku cloud support at 114.56. Forex Trader at this point may decide to immediately open a trading position below the support level of 114.56 or place a pending order is one point below the minimum torgoovy session. Placing a pending order one point below, it will be an additional proof of the fact that the momentum of movement in the market is still down. After that, we will place a stop loss just above the high of the candle within Ichimoku cloud. In our case, it would be at point C, or at the level of 116.65. The price on the market should not trade above this level, if the momentum is still preserved. As a result, we are entering the market at the price of 114.22 and a safety stop-loss at 116.65, our risk in this case is 243 points.
In accordance with the basic money management rules establish the ratio of profit to risk in the amount of 2: 1 . The price on the market has passed down to its minimum 108.96, which is about 500 points, and it follows our considered transaction brought a good profit.
But remember that Ichimoku is usually applied to a large scale of time , in this case, to the day (D1).
Now repeat the learned:
1. Crossing the Kijun line and the Tenkan - good help to identify potential market price movements (and acts like a moving average).
2. Confirmation of the trend direction by Chikou line - make sure that the forex market sentiment for this currency pair corresponds to the direction of lines crossing the Tenkan Kijun and - this considerable increase the likelihood of concluding a profitable trade because Chikou acts like Momentum indicator.
3. The price on the chart have to break through the Ichimoku cloud - a trend that the market has become pronounced, the price is necessary to break out of the clouds acting as a resistance-support. This will significantly increase the likelihood of concluding a profitable trade.
4. At the conclusion of the transaction - to observe the rules of money management (risk on the concluded transaction must always be at least 2, and even more than half the desired profit).
Relatively little strange and immediately understood Forex Ichimoku indicator , if it is well understood, can be very useful for any trader forex - from the beginner to the professional trader.
