Ichimoku settings

by Malcolm Pryor on 15/07/2014
Ichimoku can be used on any timeframe. Here are the definitions of the 5 lines, and how they are constructed. The Turning Line: this is one of the 2 I leave off the chart, it is like a moving average; it is the midpoint of the high of the last 9 periods and the low of the last 9 periods. The Standard Line: this is the other one I leave off the chart, it is also like a moving average; it is the midpoint of the high of the last 26 periods and the low of the last 26 periods. Cloud Span A: this is one of the 2 lines used to construct the Cloud; it is the midpoint of the Turning Line and the Standard Line, but shifted 26 bars forward. Cloud Span B: this is the other line used to construct the Cloud; it is the midpoint of the last 52 bars, but shifted 26 bars forward. Note that both Cloud Span A and Cloud Span B have this element of being shifted 26 bars forward, and the area between them is shaded; this means that we can look ahead and see where the Cloud will be after the current period, which is useful. The Lagging Line is price shifted back 26 periods. The Lagging Line is key to my interpretation of Cloud Charts. Although some people use crossing of the Turning Line and Standard Line to generate trading signals (much like moving average crossovers) I don’t, and neither line is on my chart, as mentioned. The key components of my interpretation of Clouds are: 1) If price and the Lagging Line are above the Cloud that is bullish, if both are below that is bearish 2) The Cloud represents an area of support for price and the Lagging Line when they are above it, an area of resistance when below it 3) Unlike some I do not become bearish just because price penetrates the lower end of the Cloud, or bullish if price penetrates the upper end of the Cloud; for me to be bearish both price than the Lagging Line have to be below the Cloud, to be bullish both price and the Lagging Line have to be above the Cloud 4) Interpretation works best if at least 2 timeframes are examined 5) Ichimoku is only one of a range of techniques I use to analyse markets.


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