Ichimoku indicator. Forex for beginner traders and investors

Ichimoku Kinko Hyo or the Ichimoku indicator is one of the standard distributions is included in some of the trading platform. It belongs to the category of technical indicators for the analysis of the currency market «Forex». In the absence of distribution in the terminal it can be easily downloaded online. Trading tool is freely available.

Of the history

The Developer of the program is a trader from Japan by Goichi Hosoda. Developed in the 30-ies, Ichimoku indicator initially has been adapted for trading on the stock markets in the long term. This is due to the fact that the advantage of the investors was given to investing in stocks for the long term. Indicator analyze market movements during the trading year. The indicator used to analyze and predict the stock market of Japan. After a time, the Ichimoku system was rebuilt under the foreign exchange markets began to show good results of trading not only on a weekly but on the daily charts.

Description

Ichimoku indicator combines several options of analyzing the market. It is used to determine trends (with lines of support and resistance inclusive). It is used for the generation of signals for buying and selling of different trading instruments. Feature of the program is its unique ability to visually convey information about the state of the market trader. The functionality of the program allows you to change the color of the lines and clouds. Every trader can choose the colors that will be easily perceived.

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Structure of the technical analysis tool

The Program is based on three time intervals, which differ by 9, 26 and 52. Lines, which are based on average price values, helped to develop the most accurate mechanism for market analysts. This distribution has certain similarities with a tool such as Moving Average. The differences are only in the installed options. Whereas in moving averages applied arithmetic mean value of prices, the Ichimoku system is based on the Central figures price range. This allows you to eliminate the issue of lag indicator on the price chart.

Ishimoku Lines

Lines of Ichimoku are the basis of the whole distribution. As mentioned earlier, they are based on different time periods. Of five lines being built color scheme. Region between two pairs of lines zastrahovatsja different colors. The grid is superimposed on the graph of price movements.

Detailed analysis of the market conducted on the basis of the location of the bars of the symbolism of the indicator.

• Tenkan-sen — it is a reversal trend line, which with the standard settings of the indicator is reflected in red on the chart. It allows you to define temporary (short) trend. It crosses the average of the maximum and minimum prices over a long period of time. If the line is pointing up, the trend is upward, downward — in a downtrend. A parallel arrangement of line indicates flat.
• Cinjun-Saint — this is the main line that with the standard settings on the chart is blue. This long-term trend line, which is calculated based on 26 periods. Interpretation of lines similar to the Tenkan-sen.
• Senkou-span A is the middle between Kenjun-sen and Tenkan-sen. She shifted forward on size of the second time interval. Denoted on the chart sandy color.
• Senkou-span — is the average reading rates for the third time interval. It is shifted forward by the amount of the second time interval. On the chart has a pale purple color.
• Chico correspondingly shows the price at which the current bar is closed. Line has been shifted by the amount of the second time period. On the chart has a light green color.

The parameters of the distribution

The Ichimoku Cloud is formed by the intersection of two lines: Senkou Span A and Senkou Span B. depending on the direction of intersection changing the color of the cloud itself. When the price chart is above the cloud, this indicates upward movement. If the price is below the cloud — downward movement. When the graph is superimposed on the cloud, the market can be observed flat. During this period, trade is accompanied by high risk.

The Creator of the indicator set the following settings: 9, 26 and 50. He was guided by the following parameters.

Daily chart:

• 9 — it's a half work weeks;
• 26 — the number of working days in a month;
• 52 — is the number of weeks in a year.

Weekly schedule

• 9 weeks — 2 months;
• 26 weeks — it's six months;
• 52 weeks — a year.

A Signal is generated in the case that intersect the indicator line and the line is the closing price. The above are just the common settings. The indicator is acceptable for individual adaptation to a specific strategy. In the hands of the trader who is inclined to bring any trading instrument to perfection, this system can show a good result.

Options Ichimoku

Ichimoku indicator effective to analyze the situation on the market with standard settings. Some traderspractice reduced two times options: 5, 13 and 26.

Professional traders recommend the use of a number of other settings:

• For 15-minute charts, 30-minute and time: 15, 60 and 120.
• One-hour chart and 4-hour: 12, 24 and 120.
• Days: 9, 26 and 52.

As shown by long-term practice, the trading system Ichimoku provides maximum profitability on timeframes longer than a day. Beginners should not change the settings to Ichimoku, as this will change the essence of the trading system, and its performance may deteriorate.

Main signals to open

The Popular Ichimoku strategy involves opening positions when price crosses the Senkou-span In on the trend market. In a downward direction signal for sale. In the opposite direction — the buy signal. Signal amplification occurs when the price leaves the cloud.

During flat, at a sufficiently large width of the cloud, the buy signal comes when crossing the line Kenjun-sen and the Tenkan-sen line in the upward direction from the lower border of the cloud. The reverse situation — it is a sell signal.

Indicator Line to Ichimoku can be used as support and resistance. Considered to be very relevant open positions on the rebound and on the break. Effective is the combination of the indicator with candlestick analysis. If the intersection of the lines short-and long-term trend is formed pattern, such as a pin bar, or appearing candle absorption, may in accordance with the rules of trade based on the candlestick chart analysis.

Formation of a long-term trend

Ichimoku Trading system allows you to define the beginning of strong trend movement. In a situation when the long-term trend line and the short is parallel with respect to each other and the Senkou-Span direction, it will signal the formation of a strong and lasting movement. When you roll back to one of the lines during an established trend can be refilled positions. In an uptrend the top position should take the Tenkan-sen line, in the center — Kijun-sen and Senkou-Span. During the descending movement of the price, the location of the upper and lower lines must be mirrored. The intersection of the two trend lines in the trader's language called "Golden cross". This is one of the strongest signals that major market players are practicing during the trade.

Ichimoku as the basis of a trading system

The Ichimoku Cloud is perceived by major players in the market is very ambiguous. The presence of fans kompensiruet the same number of opponents of the trend tool. Pure tool brings no great profit percentage, somewhere in the range of ( 30-40%). Basic signals for currency pairs are rare, not more than 3-4 times a month.

If you use the indicator as a base, supplementing it signals other indicators and using PriceAction, you can achieve a good result. It is useful to Supplement the system trade according to levels. And finally. Like any other tool, requires the Ichimoku trend trading. Going against the market is not only risky, it is fraught with loss of Deposit. Consequently, the signals which are received contrary to the trend should be ignored. This strategy also allowed trade on pending orders. To reduce the number of losing trades will help the overall fundamental analysis. Tracking interest rates, the implementation of the policy of averaging, the statements of heads of the Central banks can react to the reversal.

Pros and cons

The Main advantage of the strategy is very accurate to the candles to determine the state of the market: flat or trend. The accuracy and visual perception graph allows you to “bite” a significant part of the movement. The line very quickly react to the appearance of new peaks in the graphs. They tend not lag as moving averages. The only disadvantage of the tool lies in the fact that if the Ichimoku cloud is small (narrow), navigate to any of the signals is not necessary. In such a situation, the system works bad.

Advice of experienced traders

In order to strategy Ichimoku gave a good ratio of profits and losses, you need to clearly follow the basic recommendations of experienced market participants.

• Technical stop order should be set in the range from 15 points to 80, depending on the currency pair. If the Euro and the dollar stop optimal is a range from 15 to 30 points, for a pound it needs to vary between 30 and 80 points. This rule is true for smaller time frames. If the trade is carried out on a day's rest or weekly chart, a stop order is set within the third or fourth level. It can reach 200 points.
• Open transaction indicator is necessary, starting from the strong levels. It is necessary to choose between the cloud and the price level, considering the variant which is closer.
• The Value of the stop order will depend on the objectives and timeframe. The recommended ratio of profit and loss should be 1 to 5.
• If you are trading with the trend, the probability of triggering the stop order is only 20%. When contrarreloj trade the probability to obtain “elk” is 80%.
• Stop under any circumstances should not stand inthe limits of the cloud. Thanks to the brilliant work of hedge funds, it can easily zadavalsya being in the improper position. The minimum size of the stop should be 5 pips from the boundaries of the cloud.

The Effectiveness of applying Ichimoku to trade on the foreign exchange market «Forex» evidenced by the fact that this tool are willing to use the dealing centers analysts to predict future movements of currency pairs. Forecasts on this system are made on a long-term perspective. Pop up and close open trades during the day is totally unacceptable. For an effective trade to hold the position will have a week or even more. The tool will bring the result in the hands of the trader who can control emotion and serious about the rules of money management. Newcomers to begin the market analysis with this tool is not necessary, you can select simplified shopping functionals.