There are a number of indicators that are used in the currency market; just one such that comes from Japan is Ichimoku. This literally means ‘one glance at the balance chart’ and is a combination of many approaches used for price movement forecasting, combined with a sequence of indicators. The same is used to indicate a trend in the market, determine resistance and support levels, and create signals to buy and sell.
• Tenkan-sen, the turning line, which is usually indicated by a red in the chart depicts the average price value during the first time interval and is calculated by the summation of maximum and minimum during this span, divided by two. This stands for a short-term trend.
• Kijun-sen, which is the second, is the base line that refers to the average price value during the second interval and is represented in blue. This is for indicating a market trend, when price is above this line, market is bullish, and when below it, it is bearish.
• Senkou A is the first leading line that indicates the mid distance between two past lines.
• Senkou B is the second leading line, which indicates the average price during the third time interval.
• Kumo or Cloud is the crosshatched distance between first and second leading line. Prices within this show trendless market.
• Chinkou Span or the lagging line is depicted by present closing prices. When crossing the price chart from down upwards. It indicates buy option and when in top to down direction, it is a signal to sell.
• Tenkan, Kijun and Senkou together depict the MACD indicator.
The above indicator is useful for not just daily and weekly cycles, but can be used effectively for many other markets and timeframes. Like any other technical indicator in the forex market, even this one requires understanding before beginning. If learned and practiced properly this tool can help in correctly predicting the price movement with maximum efficiency and while leaving minimum room for errors.