The Ichimoku Kinko Hyo indicator was originally developed by a Japanese newspaper writer to combine various technical strategies into a single indicator that could be easily implemented and interpreted. In Japanese, “ichimoku” translates to “one look,” meaning traders only have to take one look at the chart to determine momentum, support, and resistance.
Ichimoku may look very complicated to novice traders that haven’t seen it before, but the complexity quickly disappears with an understanding of what the various lines mean and why they are used.
The Ichimoku indicator is best used in conjunction with other forms of technical analysis despite its goal of being an all-in-one indicator.
Kijun Sen (blue line): Also called the standard line or base line, this is calculated by averaging the highest high and the lowest low for the past 26 periods.
Tenkan Sen (red line): This is also known as the turning line and is derived by averaging the highest high and the lowest low for the past nine periods.
Chikou Span (green line): This is called the lagging line. It is today’s closing price plotted 26 periods behind.
Senkou Span (orange lines): The first Senkou line is calculated by averaging the Tenkan Sen and the Kijun Sen and plotted 26 periods ahead.
strategy("Ichimoku Kinko Hyo: Basic Strategy", overlay=true) //Inputs ts_bars = input(9, minval=1, title="Tenkan-Sen Bars") ks_bars = input(26, minval=1, title="Kijun-Sen Bars") ssb_bars = input(52, minval=1, title="Senkou-Span B Bars") cs_offset = input(26, minval=1, title="Chikou-Span Offset") ss_offset = input(26, minval=1, title="Senkou-Span Offset") long_entry = input(true, title="Long Entry") short_entry = input(true, title="Short Entry") middle(len) => avg(lowest(len), highest(len)) // Ichimoku Components tenkan = middle(ts_bars) kijun = middle(ks_bars) senkouA = avg(tenkan, kijun) senkouB = middle(ssb_bars) // Plot Ichimoku Kinko Hyo plot(tenkan, color=#0496ff, title="Tenkan-Sen") plot(kijun, color=#991515, title="Kijun-Sen") plot(close, offset=-cs_offset+1, color=#459915, title="Chikou-Span") sa=plot(senkouA, offset=ss_offset-1, color=green, title="Senkou-Span A") sb=plot(senkouB, offset=ss_offset-1, color=red, title="Senkou-Span B") fill(sa, sb, color = senkouA > senkouB ? green : red, title="Cloud color") ss_high = max(senkouA[ss_offset-1], senkouB[ss_offset-1]) ss_low = min(senkouA[ss_offset-1], senkouB[ss_offset-1]) // Entry/Exit Signals tk_cross_bull = tenkan > kijun tk_cross_bear = tenkan < kijun cs_cross_bull = mom(close, cs_offset-1) > 0 cs_cross_bear = mom(close, cs_offset-1) < 0 price_above_kumo = close > ss_high price_below_kumo = close < ss_low bullish = tk_cross_bull and cs_cross_bull and price_above_kumo bearish = tk_cross_bear and cs_cross_bear and price_below_kumo strategy.entry("Long", strategy.long, when=bullish and long_entry) strategy.entry("Short", strategy.short, when=bearish and short_entry) strategy.close("Long", when=bearish and not short_entry) strategy.close("Short", when=bullish and not long_entry)
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