Ichimoku Kinko Hyo: What’s the Best Time Frame to Use It?

The ichimoku kinko hyo is an indicator used in various forms of technical analysis. It is utilized to determine the direction of trends in trading and predict levels of support and resistance. The ichimoku (“one look”) strategy originates from a Japanese newspaper writer who combined various trading strategies into a single chart. These days, the strategy is most frequently used in forex trading, or the exchange of foreign currencies.

Forex trading is currently the largest market in the world, and there is little wonder why legions of traders are drawn to it every day. Motivations may range from simple curiosity to ambitions of becoming self-sufficient traders. Forex trading is high leverage and offers the potential for rapid gain, but the reverse is also true. It’s important to be well researched on the market and learn how to use various strategies and indicators to succeed.

Trading strategies

To have the best chance at success, one should be familiar with different types of trading and the ideas behind them. Whether utilizing a short or long term strategy, most traders rely on technical analysis when determining their next move. Technical analysis examines the history of the market and past trends in order to predict what will happen next. The fact that this line of thinking relies on hard data makes it attractive to newcomers and experienced traders alike.

Day trading is a short term strategy that has become more and more popular in recent years because of its daily win rate. An advantage to this strategy is that it doesn’t require a big investment to get started, and it tends to involve trading in small amounts which can make it hard to gain big profits. This form of trading can be particularly unfriendly to newcomers, as it practically needs to be treated like a full time job to be a self-sufficient option.

The swing trading strategy is more of a medium term investment and typically involves studying a trend for around a week. It requires less time than day trading, but generally needs more capital. The ichimoku strategy is particularly favored for this type of trading, since the chart goes beyond the short term movements seen in day trading and focuses on tracking market movements over time.

Incorporating Ichimoku

The Ichimoku Kinko Hyo is a chart consisting of five lines that is intended as an “all in one” technical indicator, although it is often used in conjunction with other styles of analysis. Each line represents an element of a market trend. For example, the Conversion line tracks the midpoint price of the last nine “candlesticks” (days). The Base line tracks the midpoint of the past 26 candlesticks. Examining both of these lines will show a trader how the market is changing in the short term and long term.

Leading and Lagging span lines track prices at their highest and lowest points. The “ichimoku cloud” is a highlighted area of the chart that plots multiple averages based on all of this information. When prices increase above the cloud, this marks a “bullish trend,” and when they fall below the cloud, this marks a “bearish trend.” This allows “one look” at the chart to be sufficient to make a decision, hence the name of the system.

Efficient trading

The goal of the ichimoku system is to allow traders to identify trends quickly and ride them for maximum profits. Buying just before or at the beginning of a bullish trend will allow a trader to ride the trend to its highest peak and then sell for the highest possible profit. Conversely, following the cloud will help a trader avoid buying or selling at inopportune times. Once should monitor the indicator at all times to estimate when to act. The chart is often intimidating for new traders and can take a great deal of study to become comfortable with. Patience in the beginning will be key for better results in the future.