Description
The Ichimoku Kinko Hyo or Ichimoku Cloud for short, is a time tested strategy that has been used by traders in Japan for over 80 years. It wasnʼt until the popularity of the retail global market did this become apart of many traders trading styles.
The EA uses the following components:
Tenkan-sen calculation:
(highest high + lowest low)/2 for the last “X” (5 is default) candles.
Kijun-sen calculation:
(highest high + lowest low)/2 for the past “X” (6 is default) candles.
Senkou span B calculation:
(highest high + lowest low)/2 calculated over the past 52 time periods and plotted 26 periods ahead.
Kumo (cloud):
Is the space between senkou span A and B.
The Kumo cloud changes in shape and height based on price changes. This height represents volatility as larger price movements form thicker clouds, which creates a stronger support and resistance. As thinner clouds offer only weak support and resistance, prices can and tend to break through such thin clouds.
Generally, markets are bullish when Senkou Span A is above Senkou Span B and vice versa when markets are bearish. Traders often look for Kumo Twists in future clouds, where Senkou Span A and B exchange positions, a signal of potential trend reversals.
In addition to thickness, the strength of the cloud can also be ascertained by its angle; upwards for bullish and downwards for bearish. Any clouds behind price are also known as Kumo Shadows.
