DEFINITION of 'Ichimoku Kinko Hyo'

Ichimoku Kinko Hyo, or Ichimoku for short, is a technical indicator that is used to gauge momentum along with future areas of support and resistance. The all-in-one technical indicator is comprised of five lines called the tenkan-sen, kijun-sen, senkou span A, senkou span B and chickou span.

BREAKING DOWN 'Ichimoku Kinko Hyo'

The Ichimoku Kinko Hyo indicator was originally developed by a Japanese newspaper writer to combine various technical strategies into a single indicator that could be easily implemented and interpreted. In Japanese, "ichimoku" translates to "one look", meaning traders only have to take one look at the chart to determine momentum, support, and resistance.

Ichimoku may look very complicated to novice traders that haven't seen it before, but the complexity quickly disappears with an understanding of what the various lines mean and why they are used.

The Ichimoku indicator is best used in conjunction with other forms of technical analysis despite its goal of being an all-in-one indicator.

Ichimoku Kinko Hyo Interpretation

There are five key components to the Ichimoku indicator:

  1. Tenkan-sen - The tenkan-sen is calculated by adding the highest high and the highest low over the past nine periods and then dividing the result by two. The resulting line represents a key support and resistance level, as well as a signal line for reversals.
  2. Kijun-sen - The kijun-sen is calculated by adding the highest high and the lowest low over the past 26 periods and dividing the result by two. The resulting line represents a key support and resistance level, a confirmation of a trend change, and can be used as a trailing stop loss point.
  3. Senkou Span A - The senkou span A is calculated by adding the tenkan-sen and the kijun-sen, dividing the result by two, and then plotting the result 26 periods ahead. The resulting line forms one edge of the kumo - or cloud - that's used to identify future areas of support and resistance.
  4. Senkou Span B - The senkou span B is calculated by adding the highest high and the lowest low over the past 52 periods, dividing it by two, and then plotting the result 26 periods ahead. The resulting line forms the other edge of the kumo that's used to identify future areas of support and resistance.
  5. Chickou Span - The chickou span is the current period's closing price plotted 26 days back on the chart. This line is used to show possible areas of support and resistance.

Example of a Ichimoku Kinko Hyo Chart

The following is an example of an Ichimoku indicator plotted on a chart:

Example of Ichimoku Chart

In this example, the Ichimoku kuma - or cloud- is the area that's shaded green, which represents a key area of support and resistance. The chart shows that the SPDR S&P 500 ETF remains in a bullish uptrend since the current price is trading above the cloud. If the price were to enter the cloud, traders would watch for a potential reversal of the trend.

  1. Ichimoku Cloud

    The Ichimoku cloud is a chart used in technical analysis that ...
  2. Senkou Span B

    A component of the Ichimoku Kinko Hyo indicator that is used ...
  3. Senkou Span A

    A component of the Ichimoku Kinko Hyo indicator that is used ...
  4. Technical Indicator

    Technical indicators are mathematical calculations based on the ...
  5. Test

    In technical analysis, it is when a stock price approaches a ...
  6. Trading Channel

    When charting the price of an asset, this is the space on the ...
Related Articles
  1. Trading

    A Glance At An Equilibrium Chart

    The easy-to-use Ichimoku chart can tell you quite a bit in just one glance.
  2. Trading

    Introducing Ichimoku Charts in Forex Trading

    Discover how this high-flying application can be used in forex trading.
  3. Trading

    Most Commonly Used Forex Chart Patterns

    These chart patterns provide entries, stops and profit targets that can be easily seen.
  4. Investing

    Interpreting Support And Resistance Zones

    Use of support and resistance zones can be a key to successful trades. Learn how they work and how to use them.
  5. Trading

    Understanding Support and Resistance Levels

    Understanding support and resistance levels can help investors decide to buy or sell a security.
  6. Insights

    Dragons, Samurai Warriors And Sushi On Wall Street

    From samurai to sushi, there's no denying the East Asian influence on investing terminology.
  7. Trading

    Trade on Support for the Best Exit Strategy

    Find your exit strategy based on support and resistance levels, while understanding the psychology.
  8. Trading

    Support And Resistance Basics

    Understanding the concept of support and resistance in trading can drastically improve your short-term investing strategy.
  9. Trading

    Stocks at Major Resistance - Breakout or Reverse?

    These are four stocks that both short and longer-term traders will want to keep an eye on.
  1. How can the Chikou Span help my trading strategy?

    Discover the role and uses of the Chikou span indicator, one of the five lines within the Ichimoku Kinko Hyo candlestick ... Read Answer >>
  2. How do traders create strategies based on Chikou Span?

    Learn about some of the most common trading strategies involving the Chikou span indicator from the Ichimoku Kinko Hyo charting ... Read Answer >>
  3. What is the difference between fundamental and technical analysis?

    Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at ... Read Answer >>
  4. What are the most common market indicators forex traders follow?

    Learn the most common technical indicators that forex traders and currency market analysts utilize to predict likely market ... Read Answer >>
  5. How do I start using technical analysis?

    Technical analysis is a method of analyzing securities by evaluating current and historical price and/or volume activity. ... Read Answer >>
  6. How is a simple moving average calculated?

    Learn about the simple moving average, how the indicators are used, and how to calculate a stock's simple moving average ... Read Answer >>
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center