The Ichimoku Kinko Hyo technique offers the chance to obtain many different types of operating signals through the use of a single graph. As for all trading techniques, when we are using the Ichimoku Kinko Hyo for our operations, it is always advisable to take into account other elements (volumes, sentiment, seasonality, oscillators, etc …), but certainly the immediate graphic understanding of the trend and its evolution represent the strongest point of the Ichimoku technique.
As this technique aims to find the best point of entry within a trend, the answers we get from the signals will obviously be probabilistic and will have to conceive a margin of error. A wise money management will curb this phenomenon.
Here below, we will study in deep the 5 trading techniques that can be used by any trader. As we will see below, all the examples have been classified according to the emerged signal strength: strong, neutral and weak. The element that distinguishes the strength of the signal is where the signal is placed respect the Kumo, but in some cases there can be other indicators that can help the trader in the interpretation.
TENKAN SEN /KIJUN SEN CROSS
This trading signal is applied when the Tenkan Sen (black line) cuts the Kijun Sen (red line)upward or downward.
The generated signal is bullish when the Tenkan Sen cuts the Kijun Sen from the bottom to the top. However, these signals, have a different degree of strength according to the position in which this signal occurs with respect to Kumo.
A weak bullish signal is recorded when the cutting of the two lines occurs below the Kumo.
A neutral bullish signal is recorded when the cutting of the two lines occurs inside the Kumo.
A strong bullish signal is recorded when the cutting of the two lines occurs above the Kumo.
The bearish signal is generated when the Tenkan Sen (black line) cuts the Kijun Sen (red line) from the top to the bottom.
A weak bearish signal is recorded when the cutting of the two lines occurs above the Kumo.
A neutral bearish signal is recorded when the cutting of the two lines occurs inside the Kumo.
A strong bearish signal is recorded when the cutting of the two lines occurs below the Kumo.
KIJUN SEN CROSS
When the price crosses the Kijun Sen, then we get this sort of signal.
The generated signal is bullish when the price cuts the Kijun Sen (red line) from the bottom to the top.
A weak bullish signal is recorded when the Kijun is cut from the price below the Kumo.
A neutral bullish signal is recorded when the Kijun is cut from the price inside the Kumo.
A strong bullish signal is recorded when the Kijun is cut from the price above the Kumo.
The generated signal is bearish when the price cuts the Kijun Sen (red line) from the top to the bottom.
A weak bearish signal is recorded when the Kijun is cut from the price above the Kumo.
A neutral bearish signal is recorded when the Kijun is cut from the price within the Kumo.
A strong bearish signal is recorded when the Kijun is cut from the price below the Kumo.
KUMO BREAKOUT
The so-called Kumo Breakout signal occurs when the price cuts one of the two extremes of the Kumo.
A bullish signal occurs when the price enters the Kumo and breaks its upper wall upward.
A bearish signal occurs when the price enters the Kumo and breaks its lower wall downward.
SENKOU SPAN CROSS
The Senkou Span Cross occurs when the Senkou Span A cuts the Senkou Span B.
Since the two Senkou lines are projected forward by 26 periods respect the current price, the element to be checked when the signal is realized is where the price is positioned compared to the Kumo.
The generated signal is bullish when the Senkou Span A (blue line) cuts the Senkou Span B (purple line) from the bottom to the top.
A weak bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned below the Kumo.
A neutral bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned inside the Kumo.
A strong bullish signal is recorded when at the cutting time between the two Senkou, prices are positioned above the Kumo.
The generated signal is bearish when the Senkou Span A (blue line) cuts the Senkou Span B (purple line) from the top to the bottom.
A weak bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned above the Kumo.
A neutral bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned inside the Kumo.
A strong bearish signal is recorded when at the cutting time between the two Senkou, prices are positioned below the Kumo.
CHIKOU SPAN CROSS
When the Chikou Span rises above or falls below the corresponding price then this signal is generated.
An important element is also represented by the inclination of the Chikou Span at the time of the observation. In fact, the Chikou positioning above or below the corresponding price is not enough; it also must have an upward inclination for bullish signals and a downward one for those bearish.
Since the Chikou is nothing more than the current closing price moved back by 26 periods, the necessary elements are: for the long trade, a Chikou above the corresponding price and, for the short trade, a Chikou below the corresponding price. The positioning of the current price compared to the Kumo then contributes to make the signal more or less powerful.
The generated signal is called bullish when the Chikou Span (yellow line) cuts the price from the bottom to the top.
A weak bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned below the Kumo.
A neutral bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned inside the Kumo.
A strong bullish signal is recorded when at the time of the upward cutting of the Chikou, the current price is positioned above the Kumo.
The generated signal is called bearish when the Chikou Span (yellow line) cuts the price from the top to the bottom.
A weak bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned above the Kumo.
A neutral bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned inside the Kumo.
A strong bearish signal is recorded when at the downward cutting time of the Chikou, the current price is positioned below the Kumo.
