The Ichimoku Kinko Hyo indicator was designed by Goichi Hosoda. It was described in his book in 1969. It is also known as the Ichimoku Cloud. The name Ichimoku Kinko Hyo in translation means “one look equilibrium chart”. It comes from the fact that you can identify the trend and trading signals with just one look at the chart.
The Ichimoku Kinko Hyo indicator on the Binomo platform
Once you are logged in to your Binomo trading account, choose the asset and the type of the chart. Then, click on the indicators icon and find the Ichimoku Kinko Hyo.
At first, you may be a little bit overwhelmed by the Ichimoku Kinko Hyo. It is composed of 5 lines. But let me simplify it for you.
Four of the lines are based on the average high and low over a given time period. When the indicator was designed, the computers were not so commonly used and the calculations were made on the average high and low instead of the moving averages.
Line number one is the Conversion Line with the default period set at 9. On a daily chart, it is the middle point of the 9-day high/low interval. This line is the most sensitive and the fastest one.
Line number two is known as the Base Line. The default period is set at 26. Its relation to the Conversion Line reminds the connection between the 9-day and 26-day moving averages.
The Lagging Span is line number 3 with the period 26 and is plotted 26 preceding days.
The Leading Span A and the Leading Span B are lines number 4 and 5. They create a cloud on the price chart. The faster cloud boundary is formed by the Leading Span A which is the Conversion Line added to the Base Line and divided by 2. The slower boundary of the cloud is the Leading Span B line and is calculated by adding 52-period high to 52-period low and divided by 2.
With time, you can play with the Ichimoku Kinko Hyo settings and observe how its appearance changes.
Ichimoku Kinko Hyo readings
With the Ichimoku Kinko Hyo attached, you will be able to identify the trend with one look at the chart. It is enough to observe the cloud. If it is visible below the candlesticks, the market is in the uptrend. If the cloud forms above the candlesticks, there is a downward movement in the market.
Also, the colour of the cloud changes. In the uptrend, the Leading Span A is rising above the Leading Span B and the cloud is green. During the downtrend, the Leading Span A is falling below the Leading Span B and the cloud has red colour.
On the basis of the cloud, which is 26 days ahead, you can catch the future levels of support and resistance.
In the graph above, the green cloud has changed to the red one and the Leading Span A has moved below the Leading Span B. We can assume the market is in a downtrend. Moreover, the cloud gives an insight into the resistance level in the future.
Below the situation is quite the opposite. The cloud has changed its colour to green and the Leading Span A has risen over the Leading Span B. The cloud acts as the support and gives us a clue where future support could be identified.
How to trade with the Ichimoku Kinko Hyo indicator on Binomo
I advise trading in line with the trend as the signals received at these times are more accurate. Search for the opportunities to open an Up position when the price bars appear over the cloud which is green in colour. You can open a Down trade when the price bars are below the red cloud.
Conversion and Base Lines crossings
If you wish to open an Up trade, the market should be in the uptrend. The cloud should be green and the prices above the cloud.
Observe the Conversion and Base Lines. When the first one cuts the second one on its way up, you have received a signal to open a trading position for the price increase.
If you want to open a trade for the price decrease, wait for the downtrend in the market. The prices should move below the cloud which is red in colour. The next step is to wait for the lines to intersect. You get the signal when the Conversion Line cuts the Base Line from top to bottom.
Price and the Base Line crossings
An Up trade can be open during the uptrend so the prices should be visible above the green cloud. A signal to open a long position is produced when the price is beneath the Base Line and then rises above the Ichimoku Kinko Hyo line.
Enter a trade for the price decrease when the market is in the downtrend. Ensure the prices are below the red cloud. A signal to open a transaction is produced when the price moves above the Base Line and then cuts the line from above.
Conclusion
The Ichimoku Kinko Hyo is created by 5 lines. It will help you to identify the trend with just one look at the chart. It is enough to analyse the relation between the prices and the cloud.
Trading signals are received at the crossovers. You can use the crossings of the Conversion Line and the Base Line or the price and the Base Line. The crossovers of the price and the Base Line can be spotted more often, however, they give a bit weaker signals than the Conversion and Base Lines intersections.
It is possible to use the Ichimoku Kinko Hyo with other tools. For instance, combine it with the RSI to recognise overbought and oversold zones.
Make sure you have opened the Binomo demo account. This is a place where you can practice today’s strategy without worrying about losing your money.
Wish you a pleasant experience with Binomo!