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Ichimoku Elements
Ichimoku Kinko Hyo is a technical trend trading charting system that has been used by Japanese
commodity and stock market traders for decades and is gaining increasing popularity amongst western
stock market traders, being commonly referred to as Ichimoku Cloud charts.
IchimokuTrader.com provides only a brief summary of the Ichimoku Kinko Hyo system; further reading
is suggested.
History
The Ichimoku Kinko Hyo charting system, which translates to "equilibrium at a glance chart", was
developed by Goichi Hosoda, a Japanese journalist, who wanted to build a system to allow a trader to
quickly and easily appraise trend, momentum, and support and resistance levels. He began developing
the system before World War II and it was published in 1968, after over twenty years of testing.
Chart Elements
The Ichimoku chart is made up of five separate elements which are designed to be considered together
as a complete picture to provide a perspective on the equilibrium of the current price. These are:
Tenkan Sen Turning line
A moving average of the highest high and lowest low over the last 9 trading days.
Kijun Sen Standard line
A moving average of the highest high and lowest low over the last 26 trading days.
Senkou Span A 1st leading line
The average of the Tenkan Sen and Kijun Sen, plotted 26 days ahead.
Senkou Span B 2nd leading line
The average of the highest high and lowest low over the last 52 days, plotted 26 days ahead.
Chikou Span Lagging line
The closing price plotted 26 days behind.

The area between the two Senkou Spans is called the Kumo (Cloud).
It should be noted that several of the chart elements use the average of the highest high and lowest low
over a period, and therefore represent the mid-point of the range of prices over that period. This is
considered to provide a better visualisation of trend, momentum, and support and resistance levels than
just using an average of closing prices.
It should be stressed that no chart element should be considered in isolation; the chart should be
viewed as a whole with all elements taken into account, and intepretations should be regarded as
probabilistic, rather than predictive.

Tenkan Sen
(Highest high + Lowest low) / 2 over the last 9 trading days.

The Tenkan Sen, also known as the Turning or Conversion line, is

a moving average of the highest high and lowest low over the last 9
trading days. It is primarily used to measure short-term momentum
and is interpreted in the same manner as a short-term moving
average.
A steeply angled Tenkan Sen indicates a sharp recent price
change or strong momentum, while a flatter Tenkan Sen indicates
low or no momentum. The price breaching the Tenkan Sen may
give an early indication of a trend change.
The Tenkan Sen is generally used in combination with the Kijun
Sen to suggest probabilities of future momentum.

Example: Tenkan Sen providing support, with a trend change

following after it is breached.
 Kijun Sen
(Highest high + Lowest low) / 2 over the last 26 trading days.

The Kijun Sen, also known as the Standard or Base line, is a

moving average of the highest high and lowest low over the last 26
trading days.
As with the Tenkan Sen, the Kijun Sen is primarily used to measure
momentum, however because of its longer time period it is a more
reliable indicator of trend. A flatter Kijun Sen indicates a range
bound price, while an inclined line indicates a trend, with the angle
of the line showing the momentum of the trend.
The Kijun Sen is generally used in combination with the Tenkan
Sen to suggest probabilities of future momentum.

Example: Kijun Sen indicating bearish trend, until it flattens

indicating a range bound price.

Senkou Span A
(Tenkan Sen + Kijun Sen) / 2 plotted 26 days ahead.

The Senkou Span A, also known as the 1st leading line, is a

moving average of the Tenkan Sen and Kijun Sen and is plotted 26
trading days ahead, i.e. into the future. It is primarily used in
combination with the Senkou Span B to form the Kumo (cloud), to
indicate probable future support and resistance levels.
As price tends to respect prior support and resistance levels, time-
shifting this line forward gives a visual representation of how the
price on a date relates to support and resistance from 26 trading
days prior.
The trend is deemed to be bearish when the Senkou Span A is
below the Senkou Span B and bullish when it is above.

Example: Senkou Span A providing resistance.

Senkou Span B
(Highest high + Lowest low) / 2 over the last 52 trading days plotted 26 days ahead.

The Senkou Span B, also known as the 2nd leading line, is a

moving average of the highest high and lowest low over the last 52
trading days is plotted 26 trading days ahead, i.e. into the future.
As such it is the longest term representation of equilibrium in the
Ichimoku system. It is primarily used in combination with the
Senkou Span A to form the Kumo (cloud), to indicate probable
future support and resistance levels.
As price tends to respect prior support and resistance levels, time-
shifting this line forward gives a visual representation of how the
price on a date relates to support and resistance from 52 trading
days prior.
The trend is deemed to be bearish when the Senkou Span A is
below the Senkou Span B and bullish when it is above.

Example: Senkou Span B providing support.

 Kumo
The area between the two Senkou Spans.

The Kumo, also known as the Cloud, is the area between the
Senkou Span A and the Senkou Span B, and is at the center of the
Ichimoku system.
The Kumo is primarily used to indicate probable future support and
resistance levels, with the top of the Kumo indicating the first level
of support and the bottom the second level when the price is above
the Kumo. Conversely, the bottom of the Kumo indicates the first
level of resistance and the top the second level when the price is
below the Kumo.
A price above the Kumo indicates a bullish trend and a price below
indicates a bearish one, while price within the Kumo indicates a
potentially trend-less or range-bound situation.
The thickness of the Kumo shows the level of historical volatility, as
well as the strength of support or resistance. A thicker Kumo shows a greater the level of historical
volatility and support or resistance, and vice-versa.

Example: price range-bound within the Kumo .

Chikou Span
The closing price plotted 26 trading days behind.

The Chikou Span, also known as the Lagging line, is the closing
price plotted 26 trading days behind, i.e. into the past, providing an
at-a-glance view of how the price compares to that 26 days ago.
The trend is deemed to be upward when the Chikou Span is above
the closing prices and downward when it is below them. The
relationship is not always clear when looking at historical data, but
becomes more obvious when looking at current charts.
The Chikou Span is also considered of use for confirmation of
trends, momentum, and support and resistance levels highlighted
by the other Ichimoku elements.

Example: Chikou Span indicating a bullish trend.

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