Featured

Ichimoku Kinko Hyo- What’s Best Time Frame to Use it?


Jul.01.2014

Ichimoku Kinko Hyo: Best Time Frames

Ichimoku cloud is short for "Ichimoku Kinko Hyo" and is a combination of a bunch of moving averages. It is used as a trading indicator that helps you identify buy and sell signals when trading on charts, assisting you with you final trading strategy.

Invest Diva students are trained to use Ichimoku Kinko Hyo for their short-term and long term trades. It is part of the second point of the IDDA. Let’s first explain how Ichimoku operates, and then answer the question: “What’s the best time frame to use Ichimoku?”

The indicator contains different components including the Cloud, Tenkan, Kijun and Chikou lines which we will get into in a bit. The word Ichimoku means “first sight” in the Japanese language. This is love at first sight, baby!

By applying Ichimoku Kinko Hyo to your chart, you will know a lot of secrets about the market movements right away, especially if you are a visual trader. Even though the Ichimoku Cloud may seem complicated when viewed on the price chart, it is really a straight forward indicator that is very usable. Let’s bring this indicator into life and call it Mr. Ichimoku from now on.

Get Ichimoku Secrets Book

 

Are you getting as excited as I am? I am excited just talking about Mr. Ichimoku. And it is not only because I think Japanese guys are sexy. The full name of Mr. Ichimoku is actually ichimoku kinko hyo, which can be translated as “a glance at a chart in balance.” A Japanese journalist called Goichi Hosoda invented this charting technique in 1936, and since then Ichimoku charts have become a popular trading tool in Japan.

Of course, love at first sight can be complicated. But once you get to know it, magic can happen. Before we reveal the chart, let’s prevent a major brain meltdown by first introducing the stuff you are going to see on your chart when you insert Mr. Ichimoku onto it.

Ichimoku Kinko Hyo - Kijun Tenkan Chiko Senko lines Ichimoku Kinko Hyo - Kijun Tenkan Chiko Senko lines

 

  • 雲 Kumo, or cloud
  • 基準 Kijun, or Base line
  • 転換 Tenkan, or Turn line
  • 遅行 Chiko, or Delay

Now we are going to add all this stuff to the forex dance floor. Don’t panic; your eyes are going to get used to this, and after one day you will feel that a chart without Ichimoku is totally naked. First let’s do basic introduction, and then jump into the interpretation of Mr. Ichimoku.

Ichimoku Kinko Hyo - Chart Example Ichimoku Kinko Hyo - Chart Example

Kijun line (base line, in solid thick pink color.) This is the average of the highest high and the lowest low within the past 26 candles. We can also call it the “slow line” because it reflects a whole 26 periods.

Tenkan line ( turn line, solid thin). This is the average of the highest high and the lowest low within the past 9 candles. We can also call

Chiko (sometimes spelled chikou) span (delayed line, thick dashed). This shows the most recent candle’s price, but it is drawn 26 periods behind.

Kumo (cloud). This is the area between two lines that plot the future! The first thin dotted line is calculated by averaging the tenkan line and the kijun line plotted 26 periods ahead. The second one is determined by averaging the highest high and the lowest low for the past 52 periods plotted 26 periods ahead. These two lines are called senkou spans. Senkou means “future.”

Get my Insights. Free.

One good thing about modern trading including those of forex, stocks, equities and even ETF platforms, is that you can choose different colors for each of the Ichimoku lines to make your party more colorful and to identify the lines easily. I usually like to use pink for Kijun line, black for tenkan line, blue for chiko line, and light green for the kumo. Try it out on your demo platform and enjoy!

Ichimoku Interpretation

Here is a cheat sheet on how to trade using Ichimoku.

Ichimoku Kinko Hyo - Buy and Sell Signals Ichimoku Kinko Hyo - Buy and Sell Signals

 - As long as the five lines are parallel, the trend will continue in that direction.

-  When the candles are inside the Ichimoku cloud, that means that the market is in the process of consolidating, and it is not a good time to buy or sell.

-  The lower band of the prevailing cloud can be used as a layer of support.(See figure below)

-  The upper band of the prevailing cloud can be used as a layer of resistance.

Ichimoku on a Downtrend and an Uptrend:

 

Ichimoku Kinko Hyo - Cloud Acting as Support and Resistance Ichimoku Kinko Hyo - Cloud Acting as Support and Resistance

Best Time Frames to Use Ichimoku Kinko Hyo

On our Premium Closed Investing Group we had a question is from Ari who wrote:

“Hi Kiana, I find your book very easy to read. I noticed that you are a bit in favor of Ichimoku Kinko Hyo. My question to you is: what are the best time frames in correlation with Ichimoku ?  Peace! Ari”

ANSWER: Ichimoku Kinko Hyo or how I call it, Mr. Ichimoku, works best for visual traders. Just like any other indicator, the signals you get on charts with different time period are different. So if you are adding Mr. Ichimoku  on your 30-minute chart, you are likely to get a different signal than what you will get on a daily chart. The indicator is automatically calculated by your system based on the time frame that you are using, and it updates every time you change your time frame. So it all comes down to what type of a trader YOU are. If you are a day trader or a scalper, then you can use Mr. Ichimoku on shorter time frames from 1-minute chart to 6 hour. If you are a longer-term trader like myself, then you can use Mr. Ichimoku on the daily or weekly charts. A lot of times it helps if you zoom in and out of time frames to get a better understanding of the market sentiment. Don’t forget that you should never rely on only one indicator when analyzing the markets. You should always make sure that you check in with all points of the Invest Diva Diamond Analysis before making a final trading decision.

 

Ichimoku Calculations

Four of the five plots within the Ichimoku Kinko Hyo are based on the average of the high and low over a given period of time. For example, the Tenkan line is simply an average of the 9-day high and 9-day low. Before computers were widely available, it would have been easier to calculate this high-low average rather than a 9-day moving average. Here is how you can do the calculation, although you really don’t have to, because your trading platform will magically do it for you.

Tenkan-line (AKA Tenkan-sen, Conversion Line): (9-period high + 9-period low)/2))

The default setting is 9 periods and can be adjusted. On a daily chart, this line is the mid-point of the 9 day high-low range, which is almost two weeks. 

 

Kijun-line (AKA Kijun-sen, Base Line): (26-period high + 26-period low)/2))

The default setting is 26 periods and can be adjusted. On a daily chart, this line is the mid-point of the 26 day high-low range, which is almost one month). 

 

Senkou Span A (Leading Span A): (Tenkan Line + Kijun Line)/2))

This is the midpoint between the Conversion Line and the Base Line. The Leading Span A forms one of the two Cloud boundaries. It is referred to as "Leading" because it is plotted 26 periods in the future and forms the faster Cloud boundary, which help traders with predicting future market movements.

 

Senkou Span B (Leading Span B): (52-period high + 52-period low)/2))

On the daily chart, this line is the mid-point of the 52 day high-low range, which is a little less than 3 months. The default calculation setting is 52 periods, but can be adjusted. This value is plotted 26 periods in the future and forms the slower Cloud boundary.

 

Chikou Span (Lagging Span, Delayed Span): Close plotted 26 days in the past

The default setting is 26 periods, but can be adjusted.

Okay, enough advertising about Mr. Ichimoku. It certainly is very powerful in many ways, but just like any other method, you should not rely on it alone. You always have to check in with other analysis techniques before you make a final decision in your trading.

Oh, Ichimoku, what you do to me! My head is in the Ichimoku cloud, dreaming about the future of the romantic candles dancing at a Euro-American forex party. I look back and see the blue Chiko span following me. I look up, and I see the thick, pink Kijun line and the thin black Tenkan line dancing delightfully above me like danglers. I dream about the new set of earrings that I’m going to buy with my newly earned pips.

Wake up! You need to learn what each of these lines means before you think about buying new earrings with the money that you made at your forex party!

Ichimoku Kinko Hyo Practice

On your trading platform, find the tab button that inserts Ichimoku. Identify the kumo (cloud), the chiko span, the kijun line, and the tenkan line by moving your mouse over each of them. Note that the colors of the lines are different from the way I'm showing you here. In most trading platforms, you can change the color of the lines by going to Properties.

What is the position of the candles against the cloud? What is the direction of the kijun line and the tenkan line? Is the chiko span below or above the cloud? Is Ichimoku projecting a buy signal, a sell signal, or a wait-and-see signal?

Need to learn more about Ichimoku? Get my brand new Ichimoku Secrets book and be in the know.

Free MasterClass: 3 Secrets to Making Your Money Work for YOU

Ichimoku Kinko Hyo

 

Back to Top

Learn How to Grow Your Wealth