Ichimoku Kinko Hyo

Ichimoku Kinko Hyo Technical Indicator

The Ichimoku Kinko Hyo Technical Indicator is a tool that characterizes market trends, support and resistance levels, and generates buying and selling signals. It is most effective when used with weekly and daily charts.

Signal Lines

The Ichimoku Kinko Hyo indicator uses four different time intervals to determine its parameters. The values of the individual lines in this indicator are based on these intervals:

Tenkan-sen shows the average price value during the first time interval, defined as the sum of the maximum and minimum within this time, divided by two.
Kijun-sen shows the average price value during the second time interval.
Senkou Span A shows the middle of the distance between the two previous lines, shifted forwards by the value of the second time interval.
Senkou Span B shows the average price value during the third time interval, shifted forwards by the value of the second time interval.

Chikou Span

The Chikou Span line shows the closing price of the current candle shifted backwards by the value of the second time interval. The distance between the Senkou lines is hatched with another color and called the cloud. If the price is between these lines, the market is considered non-trend, and the cloud margins form the support and resistance levels.

Kijun-sen

The Kijun-sen line is used as an indicator of market movement. If the price is higher than this line, prices will likely continue to increase. When the price crosses this line, a trend change is possible. It can also be used to generate signals. A bottom-up crossover between the Tenkan-sen and Kijun-sen lines indicates a buy signal, while a top-down crossover indicates a sell signal.

Tenkan-sen

The Tenkan-sen line is used as an indicator of market trend. If this line is increasing or decreasing, a trend exists. When it moves horizontally, it indicates that the market is in a channel.

Senkou Span A and B form the cloud, drawn 26 bars ahead; Chikou Span is the close drawn 26 bars back.

Calculation of Ichimoku Kinko Hyo

With the default periods 9, 26 and 52:

TENKAN-SEN = (MAX(HIGH, 9) + MIN(LOW, 9)) / 2
KIJUN-SEN = (MAX(HIGH, 26) + MIN(LOW, 26)) / 2
SENKOU SPAN A = (TENKAN-SEN + KIJUN-SEN) / 2
SENKOU SPAN B = (MAX(HIGH, 52) + MIN(LOW, 52)) / 2
CHIKOU SPAN = CLOSE

Where:

MAX(HIGH, N) and MIN(LOW, N) are the highest high and the lowest low over the last N bars;
Senkou Span A and Senkou Span B are drawn 26 bars ahead, and Chikou Span is drawn 26 bars back.