Economic Indicators: The Ichimoku Kinko Hyo System

The inventor of the Ichimoku Kinko Hyo system is a Japanese journalist named Mr. Hosoda. He spent twenty years developing and studying the system until he achieved success in using it with various markets.

What is it?

Ichimoku Kinko Hyo is a charting system designed to track trends. It helps you enter the market during clear trends rather than during periods of volatility. 

The translation of the system’s name from Japanese to English is “Chart Equilibrium at a Glance,” emphasizing the balance of the chart when viewed. The term “Kinko” refers to equilibrium, and “Hyo” means chart.

The Ichimoku Kinko Hyo system aligns with powerful classical and wave-based technical analysis patterns. It has the potential to capture 40-80% of market movements. You can use it on any time frame for trading and it is suitable for various markets such as currencies, stocks, commodities, gold, oil, etc.

What does it include?

The Ichimoku Kinko Hyo system consists of five elements that work together as a unified system. It is important not to neglect any element or rely solely on a specific one. All elements should be considered together for the system to work correctly. The image below illustrates the five elements of the system, along with a general idea about each element:

Shinko Span line (the key to success)

It is a Moving Average (simple Moving Average) of the closing price for period 1 shifted back 26 bars or candles, meaning in the displacement field we write (-26). It represents the price linearly, so you find it moving intraday with the price and fixing at the closing, and then starting again with the opening of the new candle or bar.

Tenkin Sen line (the nerve of the trend)

The word “Tenken” in Japanese means the number 9 and the word “Sin” means “river”. It is an arithmetic average of the last 9 candles according to the time frame used. In other words, it is a collection product (the highest price of the last 9 candles + the lowest price of the last 9 candles) divided by 2, which is not shifted forward or backward.

The Kijun Sen line (trend ruler)

The word “Kigen” in Japanese means the number 26. It is the arithmetic average of the last 26 candles according to the time frame used. In other words, it is a collection product (the highest price of the last 26 candles + the lowest price of the last 26 lumens) divided by  2, which is not shifted forward or backward.

Span A line

It is the result of the sum of the Tenken-Sen line and the Kijun-Sen line divided by 2. It is shifted forward 26 candles.

Span B line

It is the arithmetic mean of the last 52 candles according to the time frame used. It is the sum of the highest price of the last 52 candles and the lowest price of the last 52 candles divided by 2, which is shifted forward 26 candles.

What are the Ichimoku clouds?

The dotted cloud that appears on the chart in the Ichimoku Kenko Hayyu system, it is called the Kumo Span cloud.

It is made up of the lines of spans A and spans B, which are the fourth and fifth elements of the system. It is considered the timing tool in the system. It is forward-shifted 26 lumens.

The second and third elements, namely the Tenken-Sen and Kigen-Sen lines, are called the Kumo-Sen cloud, which means that together they form a second cloud. But it is faster than the main Kumospan cloud and is not shifted forward like the Kumo Span cloud.

Study the chart below to see the difference between Kumo-Sen and Kigen-Sen: 

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