Ichimoku components

From IchiWiki - The Definitive Reference to the Ichimoku Kinko Hyo Charting System

Tenkan Sen
The tenkan sen, as we have already mentioned in our Introduction section, is calculated in the following manner:

TENKAN SEN ("turning line")

(HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods

While many may compare the tenkan sen to a simple 9 period simple moving average (SMA), it is quite different in the sense that it
measures the average of price's highest high and lowest low for the last 9 periods. Hosoda believed that using the average of price
extremes over a given period of time was a better measure of equilibrium than merely using an average of the closing price. This study
of the tenkan sen will provide us with our first foray into the key aspect of equilibrium that is so prevalent in the Ichimoku Kinko Hyo
charting system.

Consider the chart in Figure I below:

FIGURE I - Tenkan Sen vs. 9 Period SMA

As can be seen in the chart, the tenkan sen often exhibits "flattening" whereas the 9 period SMA does not. This is due to the fact that
the tenkan sen uses the average of the highest high and lowest low rather than an average of the closing price. Thus, during periods of
price ranging, the tenkan sen will clearly show the midpoint of the range via its flat aspect.

When the tenkan sen is flat, it essentially indicates a trendless condition over the last 9
periods.

It can also be seen how the tenkan sen provides a much more accurate level of price support than does the 9 period SMA. With only
one exception, price action stayed above the tenkan sen in the three highlighted areas of the chart, while price broke below the SMA
numerous times. This is due to the more conservative manner in which the tenkan sen is calculated, which makes it less reactive to
small movements in price. On a bearish chart, the tenkan sen will likewise act as a level of resistance.
The angle of the tenkan sen can also give us an idea of the relative momentum of price movements over the last 9 periods. A steeply
angled tenkan sen will indicate a nearly vertical price rise over a short period of time or strong momentum, whereas a flatter tenkan
sen will indicate lower momentum or no momentum over that same time period.

The tenkan sen and the kijun sen both measure the shorter-term trend. Of the two, the tenkan sen is the "fastest" given that it measures
trend over the past 9 periods as opposed to the kijun sen's 26 periods. Thus, given the very short term nature of the tenkan sen, it is not
as reliable an indicator of trend as many other components of Ichimoku. Nevertheless, price breaching the tenkan sen can give an early
indication of a trend change, though, like all Ichimoku signals, this should be confirmed by the other Ichimoku components before
making any trading decision.

One of the primary uses of the tenkan sen is vis-a-vis its relation to the kijun sen. If the tenkan sen is above the kijun sen, then that is a
bullish signal. Likewise, if the tenkan sen is below the kijun sen, then that is bearish. The crossover of these two lines is actually a
trading signal on its own, at topic that is covered in more detail in our Ichimoku Trading Strategies section.

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Kijun Sen
The kijun sen is calculated in the following manner:

KIJUN SEN ("standard line")

(HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods

The kijun sen is one of the true "workhorses" of Ichimoku Kinko Hyo and it has myriad applications. Like its brother, the tenkan sen,
the kijun sen measures the average of price's highest high and lowest low, though it does so over a longer time frame of 26 periods as
opposed to the tenkan sen's 9 periods. The tenkan sen thus provides us with all the information the tenkan sen does, just on a longer
time frame.

Due to the longer time period it measures, the kijun sen is a more reliable indicator of short-term price sentiment, strength and
equilibrium than the tenkan sen. If price has been ranging, then the kijun sen will reflect the vertical midpoint of that range (price
equilibrium) via its flat aspect. Once price exceeds either the last highest high or lowest low within the last 26 periods, however, the
kijun sen will reflect that by either angling up or down, respectively. Thus, short-term trend can be measured by the direction of the
kijun sen. In addition, the relative angle of the kijun sen will indicate the strength or momentum of the trend.

Price equilibrium is expressed even more accurately in the kijun sen than in the tenkan sen, given the longer period of time it
considers. Thus, the kijun sen can be relied upon as a significant level of price support and resistance (see highlighted areas in
Figure II below).
FIGURE II - Kijun Sen Support

Price tends to move alternately away from and back toward the kijun sen in a cyclical fashion due to the kijun sen's strong expression
of equilibrium or stasis. Thus, when price momentum is extreme and price moves rapidly up or down over a short period of time, a
certain "rubber band" effect can be observed on price by the kijun sen, attracting price back towards itself and bringing it back to
equilibrium. An analogy could be made between how price interacts with the kijun sen and how electricity always seeks to return to
ground or zero potential. The "ground" in this case is the kijun sen and price will always seek to return to that level. This phenomenon
is particularly evident when the kijun sen is flat or trendless, as can be seen in Figure III below:
FIGURE III - Kijun Sen "Rubber Band" Effect

Given the dynamics of the kijun sen outlined above, traders can use the kijun sen effectively as both a low-risk point of entry as well
as a solid stop loss. These two tactics are employed extensively in both the kijun sen cross as well as the tenkan sen/kijun sen cross
strategies which are covered in greater detail in our Ichimoku Trading Strategies section.

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Chikou Span
The chikou span is calculated in the following manner:

CHIKOU SPAN ("lagging line")

CURRENT CLOSING PRICE time-shifted backwards (into the past) 26 periods

The chikou span represents one of Ichimoku's most unique features; that of time-shifting certain lines backwards or forwards in order
to gain a clearer perspective of price action. In the chikou span's case, the current closing price is time-shifted backwards by 26
periods. While the rationale behind this may at first appear confusing, it becomes very clear once we consider that it allows us to
quickly see how today's price action compares to the price action of 26 periods ago, which can help determine trend direction.

If the current close price (as depicted by the chikou span) is lower than the price of 26 periods ago, that would indicate that there is a
potential for more bearish price action to come, since price tends to follow trends. Conversely, if the current closing price is above the
price of 26 periods ago, that would then indicate the possibility for more bullish price action to follow.

Consider the charts in Figures IV and V below:

FIGURE IV - Chikou Span in Bullish Configuration

FIGURE V - Chikou Span in Bearish Configuration

In addition to providing us with another piece of the "trend puzzle", the chikou span also provides clear levels of support and
resistance, given that it represents prior closing prices. Ichimoku practitioners can thus draw horizontal lines across the points created
by the chikou span to see these key levels and utilize them in their analysis and trading decisions (see Figure VI below).
FIGURE VI - Chikou Span Support and Resistance Levels

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Senkou Span A
The senkou span A is calculated in the following manner:

SENKOU SPAN A ("1st leading line")

(TENKAN SEN + KIJUN SEN)/2 time-shifted forwards (into the future) 26 periods

The senkou span A is best-known for its part, along with the senkou span B line, in forming the kumo, or "Ichimoku cloud" that is the
foundation of the Ichimoku Kinko Hyo charting system. The senkou span A is another one of the time-shifted lines that are unique to
Ichimoku. In this case, it is shifted forwards by 26 periods. Since it represents the average of the tenkan sen and kijun sen, the senkou
span A is itself a measure of equilibrium. Goichi Hosoda knew well that price tends to respect prior support and resistance levels, so
by time-shifting this line forward by 26 periods he allowed the Ichimoku practitioner to quickly see "at a glance" where support and
resistance from 26 periods ago (1 month ago on a Daily chart) reside compared with current price action.

While it is possible to trade off of the senkou span A and B lines on their own, their real power comes in their combined dynamics in
the kumo.

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Senkou Span B
The senkou span B is calculated in the following manner:

SENKOU SPAN B ("2nd leading line")

(HIGHEST HIGH + LOWEST LOW)/2 for the past 52 periods time-shifted forwards (into the future)
26 periods

The senkou span B is best-known for its part, along with the senkou span A line, in forming the kumo, or "Ichimoku cloud" that is the
foundation of the Ichimoku Kinko Hyo charting system. On its own, the senkou span B line represents the longest-term view of
equilibrium in the Ichimoku Kinko Hyo system. Rather than considering only the last 26 periods in its calculation like the senkou span
A, the senkou span B measures the average of the highest high and lowest low for the past 52 periods. It then takes that measure and
time-shifts it forward by 26 periods, just like the senkou span A. In Hosoda's original implementation, the senkou span B would thus
represent price equilibrium for the prior two (2) month period, shifted ahead of current price by one (1) month. This convention allows
Ichimoku practitioners to see this longer term measure of equilibrium ahead of current price action, allowing them to make informed
trading decisions.

READ THIS FIRST!

Ichimoku is a finely-tuned, integrated charting system where the five lines all work in concert to produce the end result. We
emphasize the word "system" here because it is absolutely key to understanding how to use the various trading strategies we outline in
this section. Every strategy covered below is to be used and measured against the prevailing Ichimoku "picture" rather than in
isolation. This means that, while a scenario that matches a given strategy may have transpired, you still must weigh that signal against
the rest of the chart in order to determine whether or not it offers a high-probability trade. Another way of looking at it is that
Ichimoku is a system and the discrete strategies for trading it are merely "sub-systems" within that larger system. Thus, looking at
trading any of these strategies from an automated or isolated approach that doesn't take into account the rest of what the Ichimoku
chart is telling you will meet with mixed long-term success, at best.

Don't misinterpret the message; the strategies outlined below are very powerful and can bring consistent results if used wisely - which
is within the scope of the larger Ichimoku picture. We ask that you always keep this in mind when employing these strategies.
If you are interested in discussing these trading strategies in more detail with both the authors and other Ichimoku traders, please visit
the Kumo Trader Ichimoku Forum.

Tenkan Sen/Kijun Sen Cross

The tenkan sen/kijun sen cross is one of the most traditional trading strategies within the Ichimoku Kinko Hyo system. The
signal for this strategy is given when the tenkan sen crosses over the kijun sen. sen. If the tenkan sen crosses above the kijun sen, then
it is a bullish signal. Likewise, if the tenkan sen crosses below the kijun sen, then that is a bearish signal. Like all strategies within the
Ichimoku system, the tenkan sen/kijun sen cross needs to be viewed in terms of the bigger Ichimoku picture before making any trading
decisions, as this will give the strategy the best chances of success.

In general, the tenkan sen/kijun sen strategy can be classified into three (3) major classifications: strong, neutral and weak.

STRONG TENKAN SEN/KIJUN SEN CROSS SIGNAL

A strong tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens above the kumo.
A strong tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens below the kumo.
NEUTRAL TENKAN SEN/KIJUN SEN CROSS SIGNAL

A neutral tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens within the kumo.
A neutral tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens within the kumo.
WEAK TENKAN SEN/KIJUN SEN CROSS SIGNAL

A weak tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens below the kumo.
A weak tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens above the kumo.

See the chart in Figure I below for an example of several classifications of the tenkan sen/kijun sen cross:
FIGURE I - Tenkan Sen/Kijun Sen Cross Classifications

But wait! Have you checked the chikou span?

With these three major classifications in mind, we will add something else into the equation - the chikou span. As we explained in the
section detailing the chikou span, this component acts as a "final arbiter" of sentiment and should be consulted with every single
trading signal in the Ichimiku Kinko Hyo charting system. The tenkan sen/kijun sen cross is no different. Each of the three
classifications of the TS/KS cross mentioned above can be further classified based on the chikou span's location in relation to the price
curve at the time of the cross. If the cross is a "Buy" signal and the chikou span is above the price curve at that point in time,
this will add greater strength to that buy signal. Likewise, if the cross is a "Sell" signal and the chikou span is below the price
curve at that point in time, this will provide additional confirmation to that signal. If the chikou span's location in relation to
the price curve is the opposite of the TS/KS cross's sentiment, then that will weaken the signal.
Entry

The entry for the tenkan sen/kijun sen cross is very straightforward - an order is placed in the direction of the cross once the cross has
been solidified by a close. Nevertheless, in accordance with good Ichimoku trading practices, the trader should bear in mind any
significant levels of support/resistance near the cross and consider getting a close above those levels before executing their order.

Exit

The exit from a tenkan sen/kijun sen cross will vary with the particular circumstances of the chart. The most traditional exit signal is
a tenkan sen/kijun sen cross in the opposite direction of your trade. However, personal risk management and time frame
concerns may dictate an earlier exit, or an exit based upon other Ichimoku signals, just as in any other trade.

Stop-Loss Placement

The tenkan sen/kijun sen strategy does not dictate use of any particular Ichimoku structure for stop-loss placement, like some other
strategies do. Instead, the trader should consider their execution time frame and their money management rules and then look for the
appropriate prevailing structure for setting their stop-loss.

Take Profit Targets

Take profit targetting for the tenkan sen/kijun sen cross strategy can be approached in one of two different ways. It can be approached
from a day/swing trader perspective where take profit targets are set using key levels, or from a position trader perspective, where the
trader does not set specific targets but rather waits for the current trend to be invalidated by a tenkan sen/kijun sen cross transpiring in
the opposite direction of their trade.

Case Study

In the 4H chart in Figure II below we can see a bullish tenkan sen/kijun sen cross at point A. Since this cross took place within the
kumo itself, it is considered a "neutral" buy signal, thus we wait for price to exit and close above the kumo to confirm this sentiment
before placing our long entry. Price does achieve a close above the kumo at point B (1.5918) and we place our long entry at that point.
For our stop-loss, we look for the place where our trade sentiment would be invalidated. In this case, the bottom edge of the kumo
provides us with just that at point C (1.5872).

Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while keeping an eye out for potential exit
signals. Price rises nicely for the next 10 to 11 days and then, on the 15th day of the trade, price drops enough to have the tenkan sen
cross below the kijun sen at point D. This is our exit signal, since Ichimoku is telling us that the sentiment has changed, so we close
our order at 1.6014 at point E for a total gain of over 95 pips.
FIGURE II - Tenkan Sen/Kijun Sen Cross Case Study

For maximum risk management on this trade, we also could have moved our stop-loss up with price once price was a conservative
distance away from our entry. One option for doing this would be to move the stop-loss up with the kumo, keeping it just below the
bottom edge. For even tighter risk management, we could have moved our stop-loss with the kijun sen, keeping it 5 to 10 pips below
that line as it moved up.

Kijun Sen Cross

The kijun sen cross is one of the most powerful and reliable trading strategies within the Ichimoku Kinko Hyo system. It can be used
on nearly all time frames with excellent results, though it will be somewhat less reliable on the lower, daytrading time frames due to
the increased volatility on those time frames. The kijun sen cross signal is given when price crosses over the kijun sen. sen. If it crosses
the price curve from the bottom up, then it is a bullish signal. If it crosses from the top down, then it is a bearish signal. Nevertheless,
like all trading strategies within the Ichimoku Kinko Hyo system, the kijun sen cross signal needs to be evaluated against the larger
Ichimoku "picture" before committing to any trade.

In general, the kijun sen cross strategy can be classified into three (3) major classifications: strong, neutral and weak.

STRONG KIJUN SEN CROSS SIGNAL

A strong kijun sen cross Buy signal takes place when a bullish cross happens above the kumo.
A strong kijun sen cross Sell signal takes place when a bearish cross happens below the kumo.
NEUTRAL KIJUN SEN CROSS SIGNAL

A neutral kijun sen cross Buy signal takes place when a bullish cross happens within the kumo.
A neutral kijun sen cross Sell signal takes place when a bearish cross happens within the kumo.
WEAK KIJUN SEN CROSS SIGNAL

A weak kijun sen cross Buy signal takes place when a bullish cross happens below the kumo.
A weak kijun sen cross Sell signal takes place when a bearish cross happens above the kumo.

See the chart in Figure III below for an example of several classifications of the kijun sen cross:
FIGURE III - Kijun Sen Cross Classifications

Chikou span confirmation

As with the tenkan sen/kijun sen cross strategy, the savvy Ichimoku trader will make good use of the chikou span to confirm any kijun
sen cross signal. Each of the three classifications of the kijun sen cross outlined above can be further classified based on the
chikou span's location in relation to the price curve at the time of the cross. If the cross is a "Buy" signal and the chikou span
is above the price curve at that point in time, this will add greater strength to that buy signal. Likewise, if the cross is a "Sell"
signal and the chikou span is below the price curve at that point in time, this will provide additional confirmation to that
signal. If the chikou span's location in relation to the price curve is the opposite of the kijun sen cross's sentiment, then that
will weaken the signal.

Entry
The entry for the kijun sen cross is very straightforward - an order is placed in the direction of the cross once the cross has been
solidified by a close. Nevertheless, in accordance with good Ichimoku trading practices, the trader should bear in mind any significant
levels of support/resistance near the cross and consider getting a close above those levels before executing their order.

Exit

A trader exits a kijun sen cross trade upon their stop-loss getting triggered when price crossing the kijun sen in the opposite direction
of their trade. Thus, it is key that the trader move their stop-loss in lockstep with the movement of the kijun sen in order to maximize
their profit.

Stop-Loss Placement

The kijun sen cross strategy is unique among Ichimoku strategies in that the trader's stop-loss is determined and managed by the kijun
sen itself. This is due to the kijun sen's strong representation of price equilibrium, which makes it an excellent determinant of
sentiment. Thus, if price retraces back below the kijun sen after executing a bullish kijun sen cross, then that is a good indication that
insufficient momentum is present to further the nascent bullish sentiment.

When entering a trade upon a kijun sen cross, the trader will review the current value of the kijun sen and place their stop-loss 5 to 10
pips on the opposite side of the kijun sen that their entry is placed on. The exact number of pips for the stop-loss "buffer" above/below
the kijun sen will depend upon the dynamics of the pair and price's historical behavior vis-a-vis the kijun sen as well as the risk
tolerance of the individual trader, but 5 to 10 pips should be appropriate for most situations. When looking to enter Short, the trader
will look to place their stop-loss just above the current kijun sen and when looking to enter Long, the trader will place their stop-loss
just below the current kijun sen.

Once the trade is underway, the trader should move their stop-loss up/down with the movement of the kijun sen, always maintaining
the 5 to 10 pip "buffer". In this way, the kijun sen itself acts as a "trailing stop-loss" of sorts and enables the trader to keep a tight hold
on risk management while maximizing profits.

Take Profit Targets

Take profit targetting for the kijun sen cross strategy can be approached in one of two different ways. It can be approached from a
day/swing trader perspective where take profit targets are set using key levels, or from a position trader perspective, where the trader
does not set specific targets but rather waits for the current trend to be invalidated by price crossing back over the kijun sen in the
opposite direction of their trade.

Case Study

In the 1D chart in Figure IV below for USD/CHF we can see a bullish kijun sen cross at point A. While the initial cross is above the
kumo and therefore a relatively strong cross, it is still beneath a very key chikou span level (not visible on this chart), so we wait until
we get a close above that key level before entering at point B. At this point, we also have the additional benefit of confirmation from a
bullish tenkan sen/kijun sen cross and a nice upward angle to the kijun sen, bolstering our prospects for more bullish price action even
more. For our stop-loss, we follow the kijun sen trading strategy guidelines and place it 10 pips below the prevailing kijun sen at point
C.

Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while continually moving up our stop-loss with
the kijun sen. Price rises nicely for the next 40 days staying well above the kijun sen. After this point, price begins to drop and, on the
44th day, price crosses the kijun sen and hits our stop-loss at point D closing out our trade and netting us a profit of 641 pips.

FIGURE IV - Kijun Sen Cross Case Study

Kumo Breakout
Kumo Breakout trading or "Kumo Trading" is a trading strategy that can be used on multiple time frames, though it is most widely
used on the higher time frames (e.g.: Daily, Weekly, Monthly) of the position trader. Kumo breakout trading is the purest form of trend
trading offered by the Ichimoku charting system, as it looks solely to the kumo and price's relationship to it for its signals. It is "big
picture" trading that focuses only on whether price is trading above or below the prevailing kumo. In a nutshell, the signal to go long
in Kumo breakout trading is when price closes above the prevailing kumo and, likewise, the signal to go short is when price
closes below the prevailing kumo.

See the chart in Figure V below for an example of a kumo breakout buy signal:

FIGURE V - Kumo Breakout Buy Signal

Entry

The entry for the kumo breakout trading strategy is simple - when price closes above/below the kumo, the trader places a trade in the
direction of the breakout. Nevertheless, care does need to be taken to ensure the breakout is not a "head fake" which can be especially
prevalent when the breakout takes place from a flat top/bottom kumo. To ensure the flat top/bottom is not going to attract price back to
the kumo, it is always advisable to look for another Ichimoku structure to "anchor" your entry to just above/below the kumo breakout.
This anchor can be anything from a key level provided by the chikou span, a kumo shadow or any other appropriate structure that
could act as additional support/resistance to solidify the direction and momentum of the trade.
Kumo breakout traders also make good use of the leading kumo's sentiment before committing to a trade. If the leading kumo is a
Bear kumo and the kumo breakout is also Bear, then that is a very good sign that the breakout is not an aberration of excessive
volatility, but rather a true indication of market sentiment. If the leading kumo contradicts the direction of the breakout, then the trader
may want to either wait until the kumo does agree with the direction of the trade or use more conservative position sizing to account
for the increased risk.

Exit

The exit from a kumo breakout trade is the easiest part of the whole trade. The trader merely waits for their stop-loss to get triggered
as price exits the opposite side of the kumo on which the trade is transpiring. Since the trader has been steadily moving their stop-loss
up with the kumo during the entire lifespan of the trade, this assures they maximize their profit and minimize their risk.

Stop-Loss Placement

Being a "big picture" trend trading strategy, the stop-loss for the kumo breakout strategy is placed at the point that the trend has been
invalidated. Thus, the stop-loss for a kumo breakout trade must be placed on the opposite side of the kumo that the trade is transpiring
on, 10 - 20 pips away from the kumo boundary. If price does manage to reach the point of the stop-loss, the trader can be relatively
assured that a major trend change has taken place.

Take Profit Targets

While traditional take profit targets can be used with the kumo breakout trading strategy, it is more in-line with the long-term trend
trading approach to simply move the stop-loss up/down with the kumo as it matures. This method allows the trade to take full
advantage of the trend without closing the trade until price action dictates unequivocally that the trend is over.

Case Study

In the Weekly chart in Figure VI below for AUD/USD we can see a bearish kumo breakout taking place at point A. We also see that
that leading kumo is distinctly bearish as well, which acts to confirm our breakout sentiment. Given that price is exiting from a flat-
bottom kumo and that we want to reduce any risks of entering on a false breakout, we look for a close below the last chikou span
support at .7600 before entering. The close we are looking for is achieved shortly thereafter at point B and we enter short.

For our stop-loss, we follow the kumo breakout guideline of placing it 10 - 20 pips away from the opposite side of the kumo where our
breakout is taking place. In this case, we place it 20 pips away from the top of the kumo above our entry candle at point C (.7994).

Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while continually moving our stop-loss down
with the prevailing kumo. Given that we are using the Weekly chart as our execution time frame, we prepare ourselves for a very long-
term trade. In this case, nearly two years later, price rises enough to break out of the kumo to the other side, where it triggers our buy
order some 20 pips away at point D netting us over 1100 pips in the process.
FIGURE VI - Kumo Breakout Case Study

Senkou Span Cross

The senkou span cross is one of the lesser known trading strategies within the Ichimoku Kinko Hyo system. This is mostly due to the
fact that the senkou span cross tends to be more commonly used as an additional confirmation with other trading strategies rather than
being used as a standalone trading strategy in its own right. However, it is nonetheless a solid trend trading strategy and can definitely
be used on its own.

Given that the senkou span cross strategy, like the kumo breakout trading strategy, utilize the kumo for signal generation, it is best
employed on the longer time frames of the Daily chart and above. The senkou span cross signal is given when the senkou span A line
crosses over the senkou span B line of the kumo. If the senkou span A crosses the senkou span B from the bottom up, then it is a
bullish signal. If it crosses from the top down, then it is a bearish signal. Nevertheless, like all trading strategies within the Ichimoku
Kinko Hyo system, the senkou span cross signal needs to be evaluated against the larger Ichimoku "picture" before committing to any
trade.
The thing to keep in mind with the senkou span cross strategy is that the "cross" signal will take place 26 periods ahead of the price
action as the kumo is time-shifted 26 periods into the future. This relationship is obvious when one looks at the current price on a live
chart, but less so when looking at historical price action. In addition, while all Ichimoku strategies should be exercised with the larger
Ichimoku picture in mind, this is particularly important with the senkou span cross. Thus, determining the overall trend on higher time
frames first and then taking only senkou span signals that align with that trend on the lower timeframes is the best implementation of
the senkou span strategy.

In general, the senkou span cross strategy can be classified into three (3) major classifications: strong, neutral and weak.

STRONG SENKOU SPAN CROSS SIGNAL

A strong senkou span cross signal takes place when the price curve is on the side of the kumo that matches
the sentiment of the
senkou span cross.
NEUTRAL SENKOU SPAN CROSS SIGNAL

A neutral senkou span cross signal takes place when the price curve is inside the kumo at the time of the
senkou span cross.
WEAK SENKOU SPAN CROSS SIGNAL

A weak senkou span cross signal takes place when the price curve is on the opposite side of the kumo that
matches the
sentiment of the senkou span cross.

The chart in Figure VII below shows some classifications of the senkou span cross. The dashed vertical lines represent the 26-period
relationship between price and the senkou span cross. Thus, point A represents a bullish senkou span cross that can be categorized as a
"strong" buy signal due to the fact that price (point B), at the point of the cross, was trading above the kumo. Likewise, point C
represents a bearish senkou span cross that generated a strong sell signal due to price's location at point D below the kumo. The
senkou span cross at Point E generated a neutral buy signal since price (point F) was trading within the kumo at that point.
FIGURE VII - Senkou Span Cross Classifications

Entry

The entry for the senkou span cross trading strategy is relatively simple, though, as mentioned above, entries do require even more
attention to the overall trend on higher time frames before executing any trades. After determining the trend on the higher time frames,
the trader looks for a fresh senkou span cross in the same direction as the overall trend that has been solidified by a close on the
execution time frame. Once they identify a suitable opportunity, they initiate a position in the direction of the senkou span sentiment.
As in all Ichimoku trading strategies, traders will be well-advised to consider the relative strength of the cross (vis-a-vis price's
location relative to the kumo) as well as the sentiment provided by the remaining Ichimoku components at the time of the cross in
order to ensure the most optimum entry.

It is worth mentioning here that the strong bull (buy) signal outlined in our first chart that took place in April of 2005, while
technically strong from a 1D perspective, was not aligned with the overall downtrend in-place on the Weekly and Monthly charts.
Thus, traders taking this trade signal and using a senkou span cross in the opposite direction as their exit signal would have actually
lost pips. This underscores the importance of evaluating sentiment on multiple time frames and trading with the overall trend.

Exit

The exit from a senkou span cross trade is generally signalled by a senkou span cross in the opposite direction of the trade, though
other exit signals may be taken depending upon the trader's risk tolerance and profit goals.

Stop-Loss Placement

Being a "big picture" trend trading strategy like the kumo breakout strategy, the stop-loss for the senkou span cross strategy is placed
on the opposite side of the kumo that the trade is transpiring on, 10 - 20 pips away from the kumo boundary.

Take Profit Targets

While traditional take profit targets can be used with the senkou span cross trading strategy, it is more in-line with the long-term trend
trading approach to wait for a senkou span cross to transpire in the opposite direction of the trade before closing out the position. This
method allows the trade to take full advantage of the trend without closing the trade until price action dictates unequivocally that the
trend is over.

Case Study

In the Daily chart in Figure VIII below for USD/CAD we can see a bearish senkou span cross at point A. This cross corresponds to
the candle at point B. Since the candle closed just below the kumo, the signal is considered a strong one given that its sentiment
agrees with the sentiment of the bearish senkou span cross. In addition, we confirm that the direction of this signal is aligned with the
overall downtrend in-place on the Weekly and Monthly time frames, so we know that we are trading with the trend. Nevertheless, we
are wary of the flat bottom kumo just to the right of the candle, which could act as an attractor for price, so we look for a conservative
entry point that will ensure we will not get caught in any false breakouts. The last chikou span support at 1.2292 looks like a good
anchor point for assuring this. Price closes below this point a couple of days later at 1.2290 and we enter short at point C.

For our stop-loss, we follow the kumo breakout guideline of placing it 10 - 20 pips away from the opposite side of the kumo where our
trade is taking place. In this case, we place it 20 pips away from the top of the kumo above our entry candle at point D (1.2542).

Once we place our entry and stop-loss orders, we wait for the trade to unfold while continually moving our stop-loss down with the
prevailing kumo. In this case, a bit more than four months later, price ranging has created a fresh senkou span cross in the opposite
direction of our trade at point E, corresponding to the candle at point F where we close out our trade at 1.1908, netting us over 380
pips in the process.
FIGURE VIII - Senkou Span Cross Case Study

Chikou Span Cross

For those that have been using the Ichimoku Kinko Hyo charting system for any length of time, utilizing the chikou span cross
strategy should be like second nature. Why? Because the chikou span cross is essentially the "chikou span confirmation" that savvy
Ichimoku traders utilize to confirm chart sentiment before entering any trade. This confirmation comes in the form of the chikou span
crossing through the price curve in the direction of the proposed trade. If it crosses through the price curve from the bottom up, then it
is a bullish signal. If it crosses from the top down, then it is considered a bearish signal.

Thus, we already know the power of the chikou span cross via its use as a confirmation strategy. However, when used within some
simple guidelines, the chikou span cross can be used as its own standalone trading strategy with very good success.
Like many other Ichimoku trading strategies, the chikou span cross strategy uses price's relationship to the kumo to categorize its
signals into three (3) major classifications: strong, neutral and weak.

STRONG CHIKOU SPAN CROSS SIGNAL

A strong chikou span cross Buy signal takes place when a bullish cross takes place and current price is
above the kumo
A strong chikou span cross Sell signal takes place when a bearish cross takes place and current price is
below the kumo.
NEUTRAL CHIKOU SPAN CROSS SIGNAL

A neutral chikou span cross Buy signal takes place when a bullish cross takes place and current price is
within the kumo
A neutral chikou span cross Sell signal takes place when a bearish cross takes place and current price is
within the kumo.
WEAK CHIKOU SPAN CROSS SIGNAL

A weak chikou span cross Buy signal takes place when a bullish cross takes place and current price is below
the kumo
A weak chikou span cross Sell signal takes place when a bearish cross takes place and current price is above
the kumo.

The chart in Figure IX below provides several examples of the chikou span cross. Given the fact that the chikou span is a measure of
closing price shifted 26 periods into the past, we must always keep in mind both the location of the chikou span in relation to the price
curve (the "cross" itself) and the current candle and its relation to the kumo. Thus, Point A1 is the point where the chikou span crossed
the price curve downward and Point A2 is the closing candle that initiated that bearish cross. However, since the candle at Point A2
was above the prevailing kumo at the point of the cross, this particular signal would be categorized as a "weak" bearish cross. A strong
bullish cross can be seen in Points B1 and B2 since the chikou span crossed upward through the price curve and the closing candle at
that point in time was above the prevailing kumo. Points C1 and C2 represent a weak bearish cross given that they transpired above
the prevailing kumo.
FIGURE IX - Chikou Span Cross Classifications

Entry

The entry for the chikou span cross is relatively straightforward - the trader initiates a position in the direction of the chikou span cross
after taking into consideration the cross's strength and other chart signals. For the highest probability of success, the trader will also
look for the chikou span itself to be free of the kumo as the chikou span can often interact with the kumo much like the price curve.

Exit

The most traditional exit for a chikou span cross trade is generally signalled by a chikou span cross in the opposite direction of the
trade, though other exit signals may be taken depending upon the trader's risk tolerance and profit goals.
Stop-Loss Placement

The chikou span strategy does not dictate use of any particular Ichimoku structure for stop-loss placement, like some other strategies
do. Instead, the trader should consider their execution time frame and their money management rules and then look for the appropriate
prevailing structure for setting their stop-loss.

Take Profit Targets

Take profit targetting for the chikou span cross strategy can be approached in one of two different ways. It can be approached from a
day/swing trader perspective where take profit targets are set using key levels, or from a position trader perspective, where the trader
does not set specific targets but rather waits for the current trend to be invalidated by a chikou span cross transpiring in the opposite
direction of their trade.

Case Study

In the Daily chart in Figure X below for USD/CHF we can see a bullish chikou span cross at point A. However, while it is technically
a strong cross, the chikou span is still below significant resistance provided by the two chikou span points at 1.2090. In addition, the
tenkan sen and kijun sen are in a flat configuration which doesn't provide any additional confirmation. Thus we wait for a more
convincing setup before entering Long. This is achieved five (5) days later at Point B1 when the chikou span moves back up through
the price curve after a brief dip below. We wait for the daily candle to close and then enter long at 1.2164 at Point B2. Our confidence
in this entry is increased by the bullish tenkan sen/kijun sen cross that has since transpired.

For our stop-loss, we consider the prevailing structures and decide to place it just below the kijun sen at 1.1956, since a cross below
that point will not only have the chikou span executing a fresh bearish cross, but also have price executing a bearish kijun sen cross,
both of which would invalidate our long position.

Once we place our entry and stop-loss orders, we wait for the trade to unfold. Depending upon our trading style, we could opt to trail
our stop-loss along with the kijun sen to keep a tighter rein on risk management or we could utilize the more traditional method of
waiting for a chikou span cross in the opposite direction of our trade. In this case, a chikou span cross in the opposite direction takes
place just under two months later (Point C1) at 1.2619 (Point C2) and we close out our trade for a gain of over 450 pips. It is worth
noting that, even though the chikou span cross on its own would be considered technically "weak" due to its location above the kumo,
it is bolstered by a bearish tenkan sen/kijun sen cross to form a bearish three-line pattern. Alternatively, if we had chosen to use the
kijun sen as our trailing stop in this trade, instead of waiting for a chikou span cross, we would have exited somewhere around the
1.2735 level, which would have netted us over 560 pips.
FIGURE X - Chikou Span Cross Case Study