Technical Analysis Crash Course: Ichimoku – the all in one technical analysis tool

Here’s my final chart I’d like to introduce you to – the Ichimoku indicator. Technically it is known as the Ichimoku Kinky Hyo indicator, but most people just refer to it as the Ichimoku indicator.

If you place the Ichimoku indicator on a chart, it might look at big confusing at first as there are a lot of moving parts to it. This indicator is a both a lagging and leading indicator on top of being a trend and momentum indicator. Think of it as an all-in-one technical analysis tool.

So what exactly are you looking at with the Ichimoku indicator? Below is an illustration and explainer:

Shoprite RSI

Tenkan-Sen: The Tenkan-Sen is your short term moving average. It looks back at the last 9 candles and indicates the midpoint between the highest high and lowest low created over that 9-candle period.

Kijun-Sen: This is your medium-term moving average and works exactly the same as the Tenkan-Sen except that it looks back over the last 26 candles instead of the last 9 candles. If the Tenkan-Sen is above the Kijun-Sen, then you are in an uptrend and vice versa. Furthermore, the bigger the gap between the two lines, the more momentum the current trend has.

Chikou Span: The Chikou Span is equal to the current price of the share but set back 26 periods. If the Chikou Span is below the candle created 26 periods ago, the stock is in an uptrend and vice versa. If the Chikou Span is moving in between candles, then there is no trend and the stock is in a consolidation period.

Senkou Span A: This line indicates the midpoint between the Tenkan-Sen and Kijun-Sen.

Senkou Span B: This line works the same as the Tenkan-Sen and Kijun-Sen except that it looks back over the last 52 candles as opposed to 26 or 9.

Both Senkou spans are plotted 26 periods into the future. Together they create what is known as the cloud and this cloud serves as your leading indicator.

If Span A is above Span B, the cloud will be green, predicting a bullish trend uptrend. If Span A is below Span B, the cloud will be red, predicting a bearish downtrend.

You will often find that all these lines also serve as areas of support and resistance.

You can see, for instance, in the below image how the candles stuck to the Tenkan-Sen as it acted as an area of resistance:

Then in the following image, you can see how the cloud went green, predicting that the trend will turn bullish as it then continued to do:

So as you can see, with all these moving parts of the Ichimoku, there are many different strategies you can employ. The above strategies are only two examples.

The Ichimoku is available on the Rand Swiss trading platform. You can give it a go with South Africa’s best rated broker.


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