Ichimoku indicator. "Forex" for beginning traders and investors

Ichimoku Kinko Hyo, or Ichimoku indicator, is one of the standard distributions that is included in some trading platforms. It belongs to the category of technical indicators for the analysis of the foreign exchange market "Forex". If there is no distribution in the terminal, you can easily download it on the Internet. The trading instrument is publicly available.

Excursion to the history

The developer of the program is a trader from Japan Goichi Hosoda. Designed back in the 30's, Ichimoku-indicator was originally adapted for trading in stock markets on long-term prospects. This is due to the fact that the advantage of investors was given to investing in stocks for a long time. The indicator analyzed market movements throughout the whole trading year. The indicator was used to analyze and forecast the stock market in Japan. After a while, the Ichimoku system was rebuilt under foreign exchange markets and began to show good trading results not only on weekly, but also on daily charts.

Description

Ichimoku indicator combined several options for analyzing the market. It is used to determine trends (with support and resistance lines inclusive). With its help, signals for the purchase and sale of various trading instruments are generated. A special feature of the program is its unique ability to visually transmit information about the state of the market to the trader. The functional of the program allows you to change the colors of lines and clouds. Each trader can choose the color gamut that will be easily perceived by him.

Structure of the technical analysis tool

The program is built on three time intervals, which differ in time: 9, 26 and 52. The lines, which are based on average price values, allowed to develop the most accurate mechanism for market analysts. The distribution has a certain similarity with such a tool as the Moving Average. Differences are only in the parameters to be set. While moving average means use the arithmetic average of prices, the Ichimoku system is based on the central indicators of the price range. This allows you to eliminate the problem associated with the lag of the indicator from the price chart.

Lines of Ichimoku

Ichimoku lines are the basis of the entire distribution. As it was written earlier, they are based on different time periods. Of the five lines, a color scheme is built. The areas between the two pairs of lines are shaded in different colors. The grid is superimposed on the price movement chart.

A detailed analysis of the market is conducted based on the location of the bars relative to the indicator symbols.

• Tenkan-Sen is a reversal trend line, which, with standard indicator settings, is reflected in red on the price chart. The line allows to define short-term (short) trend. It crosses the average of the highs and lows of prices over a long period of time. If the line is directed upwards, the trend is upward, down is downward. The parallel arrangement of the line indicates a flat.
• Kinjun-Sen is the main line, which, with the standard settings on the chart, is blue. This is the long-term trend line, which is calculated on the basis of 26 time periods. The interpretation of the line is similar to Tenkan-Sen.
• Senkou-spen A is the middle between Kinjun-Sen and Tenkan-Sen. It is shifted forward by the size of the second time interval. It is indicated on the graph with a sand color.
• Senkou-spen B is the average price indication for the third time interval. It is shifted forward by the volume of the second time interval. The chart has a pale purple color.
• Chikou-spen shows the price at which the current bar closed. The line is shifted by the volume of the second time interval. The graph has a green color.

Distribution options

The Ichimoku cloud is formed by the intersections of two lines: Senkou Span A and Senkou Span B. Depending on the direction of the intersection, the color of the cloud itself changes. When the price chart passes over the cloud, this indicates an upward movement. If the price is below the cloud, the downward movement. When the graph is superimposed on the cloud, a flat can be observed on the market. During this period, trade is accompanied by high risks.

The indicator creator has set the following settings: 9, 26 and 50. It was guided by the following parameters.

For the daily chart:

• 9 are a half working week;
• 26 - the number of working days in a month;
• 52 is the number of weeks in a year.

For a weekly chart:

• 9 weeks is 2 months;
• 26 weeks is six months;
• 52 weeks - a year.

The signal is formed in the event that the indicator line and the closing price line intersect. Above are only common settings settings. The indicator is quite acceptable for individual adaptation to a specific strategy. In the hands of a trader who is inclined to bring any trading instrument to perfection, this system can show a decent result.

Ichimoku Settings

Ichimoku indicator is effective for analyzing the situation on the market with standard settings. Some traders practice the use of doubled parameters: 5, 13 and 26.

Professional traders recommend the use of a number of other settings:

• For 15-minute charts, 30-minute charts and hourly ones: 15, 60 and 120.
• For the hourly chart and the 4-hour chart: 12, 24 and 120.
• For dnevki: 9, 26 and 52.

As the long-term practice has shown, Ichimoku's trading system ensures maximum profitability on timeframes for more than a day. Beginners should not change the Ichamoku settings, as this will change the essence of the trading system, and its effectiveness may decrease.

Main signals for opening

The popular Ichimoku strategy calls for opening positions when the price crosses the Senkou-spen B line in the trend market. When the direction from the top down comes a sell signal. In the opposite direction - a signal to buy. Signal amplification takes place when the price leaves the cloud.

During the flute, with a sufficiently large cloud width, a buy signal is received when crossing the Kinjun-sen line with the Tenkan-Sen line in the direction from below upwards at the lower boundary of the cloud. The reverse situation is a signal for sale.

Ihimoku indicator lines can be used as support and resistance. It is quite appropriate to consider open positions for a rebound and for a breakout. Combining the indicator with candlestick analysis is considered effective . If a pattern such as a pin bar is formed at the intersection of the short-term and long-term trend lines, or an absorption candle appears, you can open according to the candlestick trading rules .

Formation of a long-term trend

Trading system Ichimoku allows you to determine the beginning of a strong trend movement. In a situation where a long-term trend line and a short-term line will take a direction parallel to each other and the Senkou-Spence line, this will be a signal for the formation of a strong and prolonged movement. When you roll back to one of the lines with an established trend, you can add positions. With an upward trend, the Tenkan-Sen line should occupy the top position, in the center - Kijun-Sen, and in the lower part of Senkou-Spen. With a downward price movement, the layout of the top and bottom lines should be mirrored. The intersection of two trend lines in the language of traders is called the "golden cross". This is one of the strongest signals that large market players practice during trading.

Ichimoku as the basis of the trading system

Ichimoku Cloud is perceived by large players of the market is very ambiguous. The presence of fans is compensated by a similar number of opponents of the trend instrument. In pure form, the instrument does not bring a large percentage of profits, somewhere within (30-40%). The main signals for currency pairs are rare, no more than 3-4 times a month.

If you use the indicator as a base, supplementing it with signals on other indicators and using PriceAction, you can achieve a good result. It would be superfluous to supplement the system of trade by levels. And finally. Like any other tool, Ichimoku requires trading on a trend. Going against the market is not only risky, it is fraught with the loss of the deposit. Consequently, signals that go against the trend should be ignored. In this strategy, trading on pending orders is also allowed . The total fundamental analysis will help to reduce the number of unprofitable trades . Tracking interest rates, the introduction of averaging policy, the statements of the heads of central banks, you can respond in time to the trend reversal.

Pros and cons of the system

The main advantage of the strategy can be called the ability to accurately determine the state of the market: flute or trend. Accuracy and visual perception of the chart allows to "bite off" a significant part of the movement. Lines react very quickly to the appearance of new vertices on the graphs. They do not tend to be delayed, like moving averages. The only downside of the tool is that if the Ichimoku cloud is small (narrow), you do not need to focus on one of the signals. In this situation, the system does not work well.

Recommendations of experienced traders

In order for the Ichimoku strategy to give a good profit-loss ratio, it is necessary to follow the basic recommendations of experienced market participants:

• The technical stop order should be set in the range from 15 points to 80, depending on the currency pair. If for the euro and the dollar the optimal stop is the range from 15 to 30 points, for the pound it should vary between 30 and 80 points. This rule is relevant for small timeframes. If the trade is carried out on a daily basis or on a weekly chart, the stop order is set at the third or fourth level. It can reach 200 points.
• To open deals on the indicator you need, based on strong levels. You need to choose between the price cloud and the level, considering the option that is closer.
• The amount of the stop order will directly depend on the purpose and timeframe. The recommended ratio of profit and loss should be 1 to 5.
• If trading is conducted on a trend, the probability of a stop order is only 20%. With countertrend trading, the probability of collapsing "moose" is 80%.
• Under no circumstances should the stop stand within the cloud. Thanks to the mastery of hedge funds, he can easily be hurt while in an inadequate position. The minimum foot size should be 5 points from the cloud limits.

The effectiveness of using Ichimoku in trading on the Forex market is also confirmed by the fact that analysts of dealing centers are willing to use this tool to predict the movement of currency pairs. Forecasts for this system are made for long-term prospects. It is absolutely unacceptable to jump out and close open deals within 24 hours. For effective trading, it will take a week, or even more, to keep positions. The tool will bring the result in the hands of that trader who can restrain emotions and takes seriously the rules of money management. Beginners to begin the analysis of the market with this tool is not worth it, you can choose simplified trading functions.