For those who want to take their forex trading another step higher there is good news for you the Ichimoku forex analysis. Ichimoku is a Japanese forex analysis which allows traders to analyse charts faster and more accurately. In fact the word Ichimoku kinkō Hyō is translated from Japanese to English meaning “once glance equilibrium chart".
WHAT IS ICHIMOKU FOREX ANALYSIS
Ichimoku forex analysis is a technical analysis method that was developed by a Tokyo newspaper editor named Goichi Hosoda in the 1960s, it is commonly known as Ichimoku cloud and it indicates support and resistance level, trend direction and momentum, generally Ichimoku cloud is made up of four components which are
- THE TANKAN SEN:
The Tenkan Sen is also known as the conversion line which is calculated by summing up the highest high and the lowest low and dividing it by 2 over the previous 7-8 times period.
- THE KIJUN SEN:
This is also known as base line, and it is quite similar to Tenkan sen as it is also calculated as the average between the highest high and the lowest low, but in this case we take into account the 22 time periods.
- SENKOU SPAN A LINE:
The senkou span A line which is Also known as the leading span A line is calculated by summing up the Tenkan sen and the kijun sen and dividing by 2, and then plotting the calculation 26 time period ahead of the current prize.
- SENKOU SPAN B:
Senkou span B is also known as the leading span B line, and it is calculated by summing up the highest high and the lowest low, dividing it by 2 on the past 52 times and then taking a plot of it in the last 26 periods ahead.
The most important component is the Ichimoku forex analysis is the kumo also known as the cloud and it gives a representation of the current and historical prize and also takes into account the volatility of the market by representing that the guidelines for buying and selling should not be strictly based on support/ resistance line. A lot of information can be obtained from the Tenkan sen and the kijun sen lines alone as they give a representation of the data points moving averages over a short or medium term period. When it is observed that the kijun sen line crosses under the Tenkan sen line it implies that there is a fall below the medium term trends by the medium term price and that price movement are experiencing a down trend.
Ichimoku forex analysis is a powerful analysis method that not only help analyse chart faster but also give traders a filtered approach to the price action, it might be intimidating at first but when understood it gives traders an added advantage and an increased probability of trades in the forex market.
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