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Ichimoku Kinko Hyo, which means "one glance equilibrium chart", is a charting technique developed in late 1930s by Japanese journalist, Goichi Hosoda. The Ichimoku technical analysis technique was made available to the general public in 1960.
Ichimoku is used to detect trends by creating five lines calculated using the midpoint of the highs and lows of a specific number of past bars. These midpoints produce something similar to a moving average.
The Tenkan-Sen line for example is calculated by taking the midpoint of the highest value and the lowest value of the previous 9 trading bars. The Kijun-Sen is similar to the last line which the difference that it takes the midpoing of the highest value and the lowest value of the previous 26 trading bars. The other lines are called Chikoun Span (26 periods lag value of the close price), Senkou Span A and Senkou Span B.
Trading Indicator:
The different trading periods used by the Ichimoku are: 9, 26 and 52. The current trading indicator calculates the midpoint of previous highs and lows given a specific number past bars you specify.
To apply the Ichimoku Kinko Hyo Japanese charting technique, right click on your chart and click on "Edit Formula". Select File -> New formula, then type the following formula:
TenkanSen = MidPointHL(9);
KijunSen = MidPointHL(26);
ChikouSpan = ref(close, 26);
SenkouSpanA = ref((TenkanSen + KijunSen) / 2, 26);
SenkouSpanB = ref(MidPointHL(52), 26);
Interpretation:
As with moving averages, the Ichimoku Kinko Hyo generates signals when a crossover between some lines occurs.
A bullish signal is generated when the Tenkan-Sen crosses below the Kijun-Sen. Conversely, a bearish signal is generated when the Tenkan-Sen crosses above the Kijun-Sen.
A very strong buy signal occurs when the bullish signal is generated and the close price is trading above the Kumo (cloud), while a very strong sell signal occurs when the bearish signal is generated and at the same time the close price is trading below the Kumo or cloud.
