Developed in by Goichi Hosoda, the analysis tool is intended to allow traders to get an immediate view of what price momentum, strength and trend sentiment are in the market at the present time.
When applied to a price chart, it consists of five lines which can act as resistance or support levels. Its main purpose is to identify current price trends in the context of past price activity. The cloud is the most important part of the Ichimoku and is the key to interpreting it. If price movement is on top of the cloud, there is an uptrend, while if it is below the cloud, there is a downtrend.
If the price movement is inside the cloud, then the trend is sideways. In addition, if the cloud changes color during an uptrend or downtrend, it indicates that a correction is imminent and you need to adjust your trading strategy accordingly. First, look at where the conversion line and base line are in relation to the cloud. If they are on top of or below the cloud, follow these guidelines: If they are inside the cloud, they still generate trading signals based on the above guidelines but are less reliable and need to be confirmed with other indicators.
With the Ichimoku Kinko Hyo, also known as the Ichimoku Cloud, forex traders can identify a trend and decide when to trade. Forex Trading Strategies Explained. Basic Tools for Trading. Best Forex Books for Beginners. The Blade Runner Trading Strategy. Day Trading vs Swing Trading. Elders Force Index Strategy. Forex Market in Currencies. Forex Trading Beginner Tips. Most Profitable Forex Indicator. Stochastic Oscillator in Forex. Support and Resistance Forex.More...