Forex trading tips: A little known technical indicator to help you trade

Julie Brownlee, Fsp Invest, 16 Jul. 2014

Tags: technical indicator, forex trading tips, forex trading, trading forex, ichimoku, forex, trading, forex trading strategy



There are certain technical indicators that are commonly used. Even if you use a technical analysis program on a daily basis, chances are there will be a few tools you haven’t used, or perhaps haven’t even noticed are there.

Ichimoku is probably one of these. But this indicator can help you find support and resistance levels. And it can help you pinpoint breakouts.

Read on to find out more about this trading tool…



The basics of Ichimoku


A Japanese journalist developed this technical indicator 45 years ago. It’s called Ichimoku Kinko Hyo (or Ichimoku or Ichi).

After 30 years of honing the tool, he perfected the method. All you need is some basic knowledge and you too can use Ichimoku to help your trading.

And one good thing about Ichimoku is it can be pretty profitable by using it at its default setting. So you don’t have to spend hours fiddling around with setting, Max Munroe in Forex Round-Up explains.

Have a look at the chart below. It shows you the Ichimoku indicator…

Chart of Ichimoku

Yes, it doesn’t look complicated, but in fact it’s very simple.

Let’s take a closer look at what makes up this indicator.


The importance of the red and blue lines on Ichimoku


The first thing to look at is the red and blue lines. The blue line is the Kijum Sen line. The red line is the Tenkan Sen line. You can see them on the chart below…

Chart of red and blue lines on Ichimoku

To interpret these lines is easy. If the red line is above the blue line, it’s bullish. If the blue line is above the red line, it’s bearish.

Simple.

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This is so simple that if you went long when the red line went above the blue line and short when the blue line crossed the read, trading this at R10 a pip since 2009 would have made you about R15,000 on the EUR/USD!

So there you have it, a little known technical indicator to help you trade.


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