While working on a new automated trading strategy for the upcoming APEX V1, I decided to implement Ichimoku Kinko Hyo better known as Ichimoku Cloud to see what it could do in an automated trading system.
Although I had used this indicator before, I merely used it on charts as a confirmation.
If you’ve used technical indicators before you know that one technical indicator on its own is not enough for creating a reliable profitable strategy. Ichimoku Kinko Hyo, however, offers a complete trading system with support and resistance levels, trend directions and crossover signals.
Ichimoku Kinko Hyo was developed by a Japanese journalist, Goichi Hosoda and it means “One glance equilibrium chart”. At first, it might look intimidating but just as it says on the tin you can see support, resistance, trend …etc with one glance.
For brevity’s sake, we’ll just use the name Ichimoku Cloud. There are 5 key components to this indicator:
- Tenkan-sen: aka conversion line or turning line(highest high + highest low over the past 9 periods divided by 2)
- Kijun-sen: aka base line or standard line (highest high + lowest low over the past 26 periods divided by 2)
- Senkou span A: aka leading span A (Tenkan-sen + Kijun-sen divided by 2 plotted 26 periods into the future)
- Senkou span B: aka leading span B (highest high + highest low over the past 52 periods divided by 2 plotted 26 periods into the future)
