Ichimoku Kinko Hyo (IKH)
This indicator is very popular in Japan.Calculation
The indicator consists of a series of lines whose equations are given below:
where HH is the highest daily high and LL is the lowest daily low of the observation period. The indices indicate time periods. C is the day's closing price.
The parameters k, l, m and n characterize time periods. They can assume any value between 1 and 500. The standard settings are k = 9, l = 26, m = 52 and n = 26.Interpretation
The IKH is used to detect market trends, to indicate support and resistance zones and to generate trading signals. The Senkou-Span-A line and the Senkou-Span-B line are used as support and resistance lines. Between them, there lies the so-called cloud. If the price lies above the Senkou-Span lines, then the cloud is an area of support, whereas if the price lies below them, the cloud is an area of resistance.
If the Chikou-Span line crosses the price, this generates a trading signal. If it crosses downwards, then this is regarded as a sell signal, the opposite direction representing a buy signal.
The Kijun-Sen line is considered to be a signal line. If the price is above this line, a further price increase is probable. However, it is also possible to generate trading signals using the Kijun-Sen line. If the Tenkan-Sen line cross the Kijun-Sen-Linie upwards, this is a buy signal. The opposite direction is a sell signal.
The Tenkan-Sen line itself is used as a trend indicator.
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