Ichimoku Kinko Hyo oscillator trend analysis method or simply “Ichimoku” Forex & Binary Options trading observation method was found by a Japanese journalist “Hosada Goichi” in 1960’s. The main usage of this analysis technique is for clarifying the trend and price movements.
When trading Forex with the aid of Ichimoku Kinko Hyo graphs, the most important thing is selecting the most appropriate time intervals. The most effective time intervals which were obtained by the experts are 9 and 26 daily periods. And most of the serious investors prefer these intervals.
But please note that above optimum time intervals can be manually modified according to the characteristics of the traded currency pair. Our recommendation for the traders is to perceive the parity changes in accordance with the markets’ general vision and select the interval accordingly. This will be an advantageous strategy for making the parallel observations with the market players. In our technical analysis which is explained below, we will use the common interval of 9 and 26 daily intervals.
Before we continue with Ichi Moku Kinko Hyo oscillator’s technical details and commenting methods, let us share the basic terms which are being used in the graphical display above.
These technical displays are ;
- Kijun Sen : 26 days period moving averages.
- Tekan Sen : 9 days period moving averages.
- Up Kumo : It works like a moving average of Kijun Sen. Measurement method of this graph : Moving average values of Kijun Sen and Tekan Sen are added and the result will be divided by 2. Then the results will be shifted forward with the amount equaling to the Kijun Sen daily period.
- Down Kumo : “Senkou Span B” is the mid-point of 52-days-period. The measurement method of this graph : The maximum and minimum values of 52-days-period will be added and the results will be divided by 2. And then, the founded results will be shifted forward with the amount equaling to Kijun Sen daily period.
- Chikou Span : Calculated by the backward shifting of closing prices with respect to Kijun Sen time period.
Ichimoku Cloud : The region between the Up Kumo & Down Kumo graphs. Ichimoku cloud enables the traders to make more accurate and sensitive trend analyses when compared with the other trend differentiation graphs. Traders can make alternative trend analyses by integrating the graphical parity values.
When the parity graph intersects the Ichimoku Cloud from down-to-up, we can comment that parity’s main currency will gain value so that we can execute a BUY order. When the parity graph intersects the Ichimoku Cloud from up-to-down, then we can comment that parity’s main currency will loose value so that we can execute a SELL order.
Besides to above comments, Ichimoku Cloud’s thickness values enable us comments on support and resistance levels. In the regions where the thickness increases, we can comment that the support strength is high and in the regions where thickness decreases, we can comment that the support strength is low. The possibility of a trend change occurrence is higher at the values where the Ichimoku Cloud is thin.
By collectively analyzing the above-mentioned graphs, and exclusively usage of Ichimoku Kinko Hyo oscillator with the fundamental analyses techniques, highly-valuable technical comments can be generated. The most concentrated point of the traders in Ichimoku Kinko Hyo oscillator is the above explained “Ichimoku Cloud”.
Besides to “Ichimoku Cloud”, Ichimoku Kinko Hyo and the graphs generated from it, enable the analysts to make valuable comments. For example; By combining the “Chiku Span” graph with a parity graph, we can observe and define the trend characteristics.
Transaction of “Tekan Sen” and “Kijun Sen” graphs generates us the first signals of a trend change. After this intersection period, the continuity of “Chiku Span” graph along with the same trend with parity graph, will support the trend.