Indicator Ichimoku is a popular technical indicator of the forex market. It was developed in Japan, and its main task is to determine the market trend, determine the levels of support and resistance and provide the player with trading signals to buy or sell.
Therefore, it can be successfully applied as a basis - a basis for the trading system.
Experts believe that the best results, the indicator Ichimoku demonstrate at day or week intervals, and on the contrary in a state of flat and narrow range - it does not behave itself.
As mentioned above, it was created by the Japanese to work in conjunction with the candle method of analysis, to accurately determine the levels of entry and exit from the market, as well as stops and limits.
Even though this is a trend type of instrument, elements of countertrend analysis are contained within the indicator itself. It provides good signals (in a trend) and normal notifications (on the border of common oscillators in the Ranges).
If viewed from the graphical point of view, the indicator includes 3 independent lines and two lines, between which the price chart area is hatched.
The Ichimoku indicator itself consists of 5 lines:
1) Tenkan-Sen is a non-rotating line.
This is a short-term trend line, which demonstrates a «fast trend».
It is Tenkan-Sen that points to the current direction of the trend (short-term trend). This line represents the average value from the maximum and minimum prices for a long time interval.
Therefore, if it is directed upwards, this indicates that there is an upward trend in the market.
If it is directed down, this tells us that the market, at this stage, is in a flat state.
Kinjun-Sen is mainline.
Long-term trend line, which demonstrates a long-term trend, its direction.
Interpretation is similar to a short-term straight line.
3) The leading line - Senkou-Spen A
It shows us the middle of a stretch between Tenkan-Sen and Kinjun-Sen, which is shifted forward (by the length of the second timeframe).
This is the top feature of the cloud, but it is positioned as a line of future support and resistance in the market.
4) Senkou-Spen B
This line is calculated as the average value of the maximum and minimum prices, while the period takes a longer third, which is shifted forward by the value of the second timeframe Senkou-Spen. This is the lower boundary of the cloud, but also the line of future resistance and support in the forex market.
The interval between the lines and A and B, as a rule, is stroked, creating «Ichimoku cloud».
As for the line, Chico-Spen, a lagging line, it is a line of the closing price chart, which is shifted by 26 periods.
Application of this indicator.
Of the most significant signals of the indicator-Ichimoku, one can single out the intersection - the touch of the price and the Senkou-Spen B line.
If the price crosses Senkou V from the top down, we can see the sell signal, but if the intersection occurs from the bottom to the top, then this is the signal for the acquisition.
Notification of the indicator is significantly increased if prices go beyond the features of the Senkou-Spen cloud.
This trading system is similar to the standard classical tactic of suppression by the price of the moving average line.
As for the application of this tool outside the trend areas, the indicator notifications may appear during the lateral state of the market - during the flat, when the prices themselves will be inside the cloud.
If a short Tenkan-Sen line touches the bottom upwards with a long line - the direct Kinjun-Sen, then we can see the buy signal.
Crossing the downward - indicates that you need to sell.
This version of the signal is not particularly strong if the prices are located inside the cloud.
The system is similar to the classic variant of crossing two movings (moving averages).
If you use this indicator within the trading range, you can see the following.
If the prices are located in the cloud and Tenkan-Sen rushes upwards, it will move to the upper border of the interval, and if it's down to the bottom, if it is parallel (time axis), then the prices will stay at rest and standstill.
Ichimoku tactics can be based on the Tenkan-Sen turn: when you turn up - buy, when you turn down-sell if prices are inside the cloud itself.
Experts think that when you roll back and price correction, the Ichimoku tool will provide a signal about adding - to a position or about restoring a deal on a trend.
With an upward trend, the top must be Tenken-Sen, in the middle was the Kijun-Sen, at the bottom was Senkou-Spen V.
In a downtrend, on the contrary - Senkou-Spen B must necessarily be on top, Kijun-Sen is located in the middle, and Tenkan-Sen is at the bottom.
As for Senkou-Spen (A and B), they form the resistance and support of the exchange, which is located inside the cloud.
If we talk about the merits of the indicator, it makes it possible to separate: the trend from the flat, and the lines of Ichimoku instantly give their reaction to the emergence of new extremes, and therefore, do not lag (as sliding ones).
Among the drawbacks, one can point out that the tool does not work very well in the lateral movement of the market.