Ichimoku Basics
An introduction to reading the Ichimoku Kinko Hyo to assess market conditions.
The Japanese are very poetic and allegorical when it comes to describing market action. Just take Japanese candlesticks for example. You have names like the Harami (pregnant lady) describing basically an inside bar. An abandoned baby for example describes a strong bearish candle, a gap, a spinning top, then a gap back up. The candlestick on its own island is like an abandoned baby. These names not only convey the pictorial description, but also hint at the market sentiment. A trend can be born from a pregnant lady, and the abandoned baby hints at a bearish attempt that was “abandoned”.
Besides candlestick analysis, the Japanese also contributed a popular technical indicator, or you can even call it a system, call the Ichimoku Kinko Hyo.
Ichimoku – “Glance”, “One Look”
Kinko “- Balance”, “Equilibrium”
Hyo – “Chart”, “Graph”
This system is therefore loosely translated as a “A quick look at the balance of the chart”. It is basically a trend-following system that is based on moving averages. You can read the full glossary description here.
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Its been a few days. I apologize for late response. Heiken ashi candlesticks modify conventional candlesticks with the following formula:
Close = (Open+High+Low+Close)/4
Open = [Open (previous bar) + Close (previous bar)]/2
High = Max (High,Open,Close)
Low = Min (Low,Open, Close)
These candles are suppose to help visualize trend and reversal better through a smoothing out process similar to how moving averages are constructed from price. I am no expert at using this candlestick technique. But that is the basic idea.