Ichimoku Kinko Hyo

What it is

Ichimoku Kinko Hyo ('one-glance equilibrium chart') was developed by Goichi Hosoda and published in 1969. It uses five lines, each built from the midpoint of a high-low range: Tenkan-sen, the 9-period midpoint; Kijun-sen, the 26-period midpoint; Senkou Span A, the average of Tenkan and Kijun, plotted 26 periods ahead; Senkou Span B, the 52-period midpoint, plotted 26 periods ahead; and Chikou Span, the close plotted 26 periods back. The area between the two Senkou lines is the cloud (kumo).

How to spot it

• Price above the cloud: uptrend; below: downtrend; inside: no clear trend.
• A thick cloud is a stronger support or resistance area than a thin one.

How to use it

• Trade in the direction of price's position relative to the cloud, using pullbacks to the Kijun-sen.
• Many traders use the Tenkan/Kijun cross as a signal, though tests suggest it's weak on its own.

Common mistakes

• Using it on very short timeframes in choppy markets.
• Changing the settings until it fits past data.

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