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Today I am going to explain you what is Ichimoku Kinko Hyo and how to trade it. Moreover, I will show you how I trade a combination of Ichimoku Kinko Hyo with volume spread analysis as I said in my previous articles. Ichimoku is an indicator and there is in every platform. First of all, take a look in the first screen shot about how this indicator look like.
I am working in a 5min chart. The upper line of Kumo is senkou span A and the other one the senkou span B. The blue line which look like a moving average is the Kijun and the red one the tankan. Last, the green one is the chinkou.
Maybe you are confused right now but I am going to explain how this complicated thing is a very strong tool for the technical analysis. There are many theories and trading systems around this indicator and I will tell you the basics and how I use this with volume and price action. First of all, you should know that Ichimoku works better in trending markets and If you are able to catch a trend from the beginning in financial products like Spread Bets, Spot Forex you will earn good money.
You can also use it in Binary Options but I recommend longer expiries. If the price is above the Kumo there is a bullish activity in the market and an up-trend. If the price is below the Kumo there is a bearish activity in the market and a down- trend. Maybe, it will be the beginning of a new trend. In the first blue box the price broke the Kumo and we have an up- trend.
In the second blue box the price broke the Kumo senkou B and we have a mini- down trend. Another theory for the Ichimoku is about the Tenkan- Kijun Crossovers. When the tankan the red is above the Kijun the blue we have a bullish market. On the other hand when Kijun is above Tenkan there is a bearish market. So, with a crossover of these two we can take long or short signals. In this screen shot you can see a crossover and after it the Kijun is above so we have a short signal.
Some traders use Ichimoku to identify supports and resistances. The price is moving down and the chinkou the green one acts as a support. Kumo break If the price is above the Kumo there is a bullish activity in the market and an up-trend.