Ichimoku Special File (1/4) – Presentation of the Ichimoku Kinko Hyo indicator

Ichimoku Kinko Hyo is a technical analysis tool and technique based on Japanese candlesticks and taking into account both price action and time. Developed in Japan and highly prized by traders in that country (and Asia in general), this method is gaining in popularity.

Goichi Osoda: the precursor of the Ichimoku Kinko Hyo method

goichi hosodaThe Ichimoku Kinko Hyo method, or more commonly known as Ichimoku, was developed by the Japanese journalist Goichi Osoda (1898 – 1982) who became known as “Ichimoku Sanjin”. This method is based on Japanese candlesticks in order to make optimal forecasts of market fluctuations. With this technique, Goichi Osoda is based not only on price action, but also on time, following the approach of William Delbert Gann.

The principle is described in the very name of the technique: the terms “Ichimoku”, “Kinko” and “Hyo” mean “at a glance”, “balance” and “curve” respectively. It would therefore be a question here of visualizing the balance of a curve with a single glance.

To refine this method, Goichi Osoda approached a group of students who were manually calculating the curves using different criteria. It took nearly 20 years to isolate the values that are now associated with the system.

Although the work began in the early 1940s, Goichi Osoda published his books on his technique from 1969 to 1980. It contains not only scientific data, but also spiritual and philosophical information. It will then be necessary to wait until 1996 for the technique to be imported into the West, thanks in particular to Hidenobu Sasaki who then unveiled a book in English. Today, many specialists can be found and it is quite possible to find books on the Ichimoku Kinko Hyo method.

A powerful indicator

By implementing the Ichimoku Kinko Hyo tool, Goichi Osoda aimed to create a powerful indicator that would make it possible to offer several interesting information at once. The trader can first obtain levels of support and resistance. They also have the ability to identify input or output indicators. Then there is the direction of the global trend without forgetting the strength of the signals. This is a particularly interesting tool. And as its name suggests, it is quite possible to have a concrete idea of the balance of a curve at a glance.

ichimoku indicator
A beginner in trading will get dizzy when seeing these graphs but after a few hours of learning the interpretation of the different indicators at a glance will be child’s play.

How does it work?

The Ichimoku Kinko Hyo method is based on a two-month stock market cycle. The basic settings (9, 26, 52) are based on a 6-day week as was the case in Japan at the time the technique was created. Note that it is possible to adopt tighter time units.

Nevertheless, even if these are fairly old settings and even if the periods on the stock markets are no longer the same, Ichimoku Kinko Hyo remains relevant insofar as this technique is mainly used with the original parameters (in this case those in force on the Japanese markets). As a result, reactions are synchronous with relevant factors: the observation could be disrupted if everyone applies different criteria.