Ichimoku Kinko Hyo – A Brief Introduction
Ichimoku Kinko Hyo (一目均衡表, いちもく きんこう ひょう) simply means “one glance at equilibrium chart”, with the aim to portray in one look, one can identify where the trend is heading and when is the time to go for long or short, enter or exit the market.
It is a charting system usually just called Ichimoku, is developed by a Japanese named Goichi Hosoda, a journalist who used to be known as Ichimoku Sanjin, which can be translated as “What a man in the mountain sees”.
He developed this system in the late 1930s and spent thirty years perfecting the technique before releasing to the public in the late 1960s.
Ichimoku Kinko Hyo has become a popular trading tool in the Asian trading rooms and has been used extensively to trade equities, bonds, currencies, futures and commodities. While Ichimoku Kinko Hyo has enjoyed its popularity in Asia, it is not until 1990s it makes its appearance in the west.
Due to the lack of its literature in English on how to use it, it was not commonly used by the general trading public from the west.
With growing interest in the charting system and more of its literature in English, western traders begin to understand the power of this charting system.
Ichimoku Kinko Hyo charting system is made up of 5 key lines. They are known as tenkan-sen, kijun-sen, chikou span, senkou span A and senkou span B. The space between senkou span a and senkou span B is known as kumo or cloud. This five lines when constructed with the price candlesticks, will provide a graphical representation of the ichimoku charting system.
While the mentioned 5 lines give a graphical representation of ichimoku kinko hyo, it is necessary to understand the 3 principles of the ichimoku kinko hyo. The 3 principles of ichimoku theory are ichimoku number theory, ichimoku wave theory and ichimoku price theory.
With the 5 lines and 3 principles of ichimoku, a variety of ichimoku strategies can be applied to trading. In addition, other technical indicators can also be used with Ichimoku Kinko Hyo to provide insights to the price action.