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Ichimoku Kinko Hyo Strategies in Forex Trading

Updated on June 1, 2017

Ichimoku Kinko Hyo is Japanese for “One Look Equilibrium Chart”. This popular technical analysis tool is actually a combination of five indicator lines: Chikou Span, Tenkan-sen, Kijun-sen, Senkou-span A and Senkou-span B. The last two form a cloud-like structure called kumo (cloud). There are two types of kumo: up kumo and down kumo. During an uptrend, candlesticks are above the kumo. Conversely, they are below the kumo during a downtrend.

Here are three simple Ichimoku Kinko Hyo strategies that you can use in Forex trading.

BUY when the candlestick rise above the down kumo and SELL when they fall below the up kumo

When prices rise above the down kumo, it means an uptrend has probably begun. Look at the size and shape of the kumo just below it. Is it thin (tapered) and horizontal? Is the new kumo that’s forming ahead of it an up kumo? If the answer is yes to both, then you can buy. Hold your position as long the candlesticks are above the kumo and the kumo is going up without becoming too thick.

Conversely, when prices fall below the up kumo, it signals the beginning of a possible downtrend. Look at the size and shape of the kumo just above it. Is it thin (tapered) and horizontal? Is the new kumo that’s forming ahead of it a down kumo? If the answer is yes to both, then you can sell. Hold your position as long as the candlesticks are below the kumo and the kumo is going down without becoming too thick.

BUY when tenkan-sen crosses kijun-sen from below and SELL when tenkan-sen crosses kijun-sen from above

There are two thin indicators lines that move in the general direction of price movement. The blue line is called kijun-sen. It is an indicator that show medium-term momentum. The red line is called tenkan-sen. It is an Nth-period moving average. During an uptrend, tenkan-sen runs above kijun-sen. During a downtrend, tankan-sen runs below kijun-sen. When the trend reverses, they switch their positions.

Wait until these two lines cross. If tenkan-sen crosses kijun-sen from below, then buy. If tankan-sen crosses kijun-sen from above, then sell. You can hold the position as long as they are not about to about to switch their positions.

BUY when chikou-span crosses the moving average from below and SELL when chikou-span crosses the moving average from above

Chikou-span is the fat green indicator line that lags behind the current closing price. Insert a 14-, 20- or 50-period moving average. You can also use 100- or 200-period moving average. Chikou-span runs above the moving average during an uptrend and below the moving average during a downtrend. When the trend reverses, they switch their positions.

Wait until the chikou-span and moving average cross. If chikou-span crosses the moving average from below, then buy. If chikou-span crosses the moving average from below, then you can buy. If chikou-span crosses the moving average from above, then you can sell. You can hold the position as long as they do not switch sides.

Ichimoku Kinko Hyo is a great technical analysis tool. You can achieve a lot with it if you know how to use it properly. It works best with daily (D1) and longer time frames, but it is not effective in shorter time frames.

If you need help in deciding when and what to buy and sell, please visit my blog How To Do Forex. I’ve been trading Forex for the last 7 years and I know a thing or two about how the market works.

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