Trading with Ichimoku Kinko Hyo?

What is Ichimoku Kinko Hyo?

As a Forex trader, you need to have as much tools in your trading toolbox as possible. In this article, I’ll talk about the Ichimoku Kinko Hyo. A mouthful of Japanese words, yes? Well, ignore the name, focus on the Forex analysis.

Ichimoku Kinko Hyo is a technical analysis tool in Forex trading. It is used to predict future price patterns as well as future support and resistance levels.

Needless to say, Ichimoku Kinko Hyo is a Japanese term for “chart equilibrium at a glance.”

Back to serious business. Charts are usually used as graphical representation of actual events. Thus, Ichimoku Kinko Hyo is used to represent the actual market prices of Forex currencies.

You can use Ichimoku for any trading period – 1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 month…. Well, those are the time periods you will always see on your trading platform.

This Forex trading strategy can also be applied to both uptrends and downtrends. In a sideway or trendless market, however, Ichimoku is not helpful.

The lines of Ichimoku Kinko Hyo

When you click on Ichimoku in your Meta trader, the following lines will show:

Using Ichimoku Kinko Hyo in Forex Trading

Kijun Sen is always a blue line that is the average of the highest and lowest low in a 26 periods

Tenkan Sen is a red line, often calculated by finding the average of the lowest low and highest high of 9 periods.

Senkou Span are orange lines which are obtained from the average of Chikou and Senkou.

It is good to know those terms, but it is not necessary. What is important is how to use the chart in real Forex trading. Let’s get started.

How to Apply Ichimoku Kinko Hyo in Forex Trading

Here’s how you can use Ichimoku Kinko Hyo to make profits in Forex trading.

Trading using Senkou span

First, look at the Senkou span (orange lines, remember?) The two Senkou lines are potential support and resistance levels. Check the Senkou below for illustration.

Using Ichimoku Kinko Hyo in Forex Trading

From the figure, the two dotted Senkou lines act as support and resistance. The upper Senkou is orange in color while the lower Senkou is Thistle grey in color.

To trade Forex using senkou, check whether prices are above or below the Senkou span. In the above example (1-hour, GBPAUD), if the prices are above the Senkou span, then the upper senkou line becomes the first support while the lower senkou line becomes second support.

If the prices are below the Senkou span, then the lower line becomes potential first resistance while the upper senkou line becomes a potential second resistance. Capture that?

Trading Forex using Kijun Sen

Using the same example above, you can also use Kijun Sen to trade. In this case, Kijun sen indicates future prices.

Prices above the blue line indicate an upward momentum.

If the prices fall below the blue line, then the prices might be on the downward fall.

What about Tenkan Sen, the red master?

It indicates the trend of the forex market. An upward moving Tenakan-sen demonstrates an uptrend. A downward movement shows a downtrend. If the prices move sideways, it means that the market is trendless or ranging.

Lastly, to the Chikou Span.

If the green Chikou guy cuts through the price chart from bottom going up, then you got a buy signal brother. A buy signal sister.

A sell signal occurs when the Chikou crosses the price chart from up going down. Look at the figure below for buy and sell signals.

Using Ichimoku Kinko Hyo in Forex Trading

Do you see buy and sell signals in the figure above? Very good student. You could have made several pips in profits if you traded those signals.

See you in the next lesson. Trade safely, avoid emotional buying or selling. Wait for the signal, read news, and stay calm. The market is not cold porridge. It is merciless sometimes, be careful.

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