Tecnologia_Financiera

ICHIMOKU EXPLAINED PART 1 OF 6: COMPONENTS

CME:SP1!   S&P 500 FUTURES
6 months ago
The charting system of Ichimoku Kinko Hyo was developed by a Japanese newspaper man named Goichi Hosoda. He
began developing this system before World War II with the help of numerous students that he hired to run through the
optimum formulas and scenarios - analogous to how we would use computer simulated back testing today to test a
trading system. The system itself was finally released to the public in 1968, after more than twenty years of testing,
when Mr. Hosoda published his book which included the final version of the system.

Ichimoku Kinko Hyo is a purpose-built trend trading charting system that has been successfully used in nearly every
tradable market. It is unique in many ways, but its primary strength is its use of multiple data points to give the trader
a deeper, more comprehensive view into price action. This deeper view, and the fact that Ichimoku is a very visual
system, enables the trader to quickly discern and filter "at a glance" the low-probability trading setups from those of
higher probability


6 months ago
Comment: Tenkan Sen
While many may compare the tenkan sen to a 9 period simple moving average (SMA), it is quite different in the sense
that it measures the average of price's highest high and lowest low for the last 9 periods. Hosoda believed that using
the average of price extremes over a given period of time was a better measure of equilibrium than merely using an
average of the closing price.

Kijun Sen
The kijun sen is one of the true "workhorses" of Ichimoku Kinko Hyo and it has myriad applications. Like its brother,
the tenkan sen, the kijun sen measures the average of price's highest high and lowest low, though it does so over a
longer time frame of 26 periods as opposed to the tenkan sen's 9 periods. The kijun sen thus provides us with all the
information the tenkan sen does, just on a longer time frame.
6 months ago
Comment: Chikou Span
The chikou span represents one of Ichimoku most unique features; that of time-shifting certain lines backwards or
forwards in order to gain a clearer perspective of price action. In the chikou span's case, the current closing price is
time-shifted backwards by 26 periods. While the rationale behind this may at first appear confusing, it becomes very
clear once we consider that it allows us to quickly see how today's price action compares to the price action of 26
periods ago, which can help determine trend direction.

Senkou Span A
The Senkou span A is best-known for its part, along with the Senkou span B line, in forming the kumo, or "Ichimoku
cloud" that is the foundation of the Ichimoku Kinko Hyo charting system. The Senkou span A is another one of the
time-shifted lines that are unique to Ichimoku. In this case, it is shifted forwards by 26 periods. Since it represents the
average of the tenkan sen and kijun sen, the Senkou span A is itself a measure of equilibrium. Goichi Hosoda knew
well that price tends to respect prior support and resistance levels, so by time-shifting this line forward by 26 periods
he allowed the Ichimoku practitioner to quickly see "at a glance" where support and resistance from 26 periods ago
reside compared with current price action.

Senkou Span B
The Senkou span B is best-known for its part, along with the Senkou span A line, in forming the kumo, or "Ichimoku
cloud" that is the foundation of the Ichimoku Kinko Hyo charting system. On its own, the Senkou span B line
represents the longest-term view of equilibrium in the Ichimoku Kinko Hyo system. Rather than considering only the
last 26 periods in its calculation like the Senkou span A, the Senkou span B measures the average of the highest high
and lowest low for the past 52 periods. It then takes that measure and time-shifts it forward by 26 periods, just like the
Senkou span A. This convention allows Ichimoku practitioners to see this longer term measure of equilibrium ahead
of current price action, allowing them to make informed trading decisions.
6 months ago
Comment: The Kumo Cloud
The kumo is the very "heart and soul" of the Ichimoku Kinko Hyo charting system. Perhaps the most immediately visible component of Ichimoku, the kumo ("cloud" in Japanese) enables one to immediately distinguish the prevailing "big picture" trend and price's relationship to that trend. The kumo is also one of the most unique aspects of Ichimoku Kinko Hyo as it provides a deep, multi-dimensional view of support and resistance as opposed to just a single, unidimensional level as provided by other charting systems. This more encompassing view better represents the way in
which the market truly functions, where support and resistance is not merely a single point on a chart, but rather areas that expand and contract depending upon market dynamics.
Tenkan Sen
While many may compare the tenkan sen to a 9 period simple moving average (SMA), it is quite different in the sense
that it measures the average of price's highest high and lowest low for the last 9 periods. Hosoda believed that using
the average of price extremes over a given period of time was a better measure of equilibrium than merely using an
average of the closing price.

Kijun Sen
The kijun sen is one of the true "workhorses" of Ichimoku Kinko Hyo and it has myriad applications. Like its brother,
the tenkan sen, the kijun sen measures the average of price's highest high and lowest low, though it does so over a
longer time frame of 26 periods as opposed to the tenkan sen's 9 periods. The kijun sen thus provides us with all the
information the tenkan sen does, just on a longer time frame.
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ICHIMOKU EXPLAINED PART 2: TENKAN SEN/KIJUN SEN CROSS
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