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Forex Glossary

The Industry's Most Important Terms Explained

The forex industry is made up of countless definitions and it's easy to forget a few along the way. But because no forex education can be complete without a glossary of forex terms, we've compiled one which aims at explaining key definitions in the simplest way possible. This way, you'll never be lost or confused again!


Ichimoku Kinko Hyo

A technical indicator rather than a complete system that is used to identify with “one look” at the chart, the direction of the market, entries (buy and sell) and support and resistance levels. It consists of 5 lines:

  • Tenkan-sen : (Highest High + Lowest Low)/2 for the last 9 periods
  • Kijun-sen     : (Highest High + Lowest Low)/2 for the last 26 periods
    • When Tenkan-sen and Kijun-sen are combined together they provide buy/sell signals
    • When Tenka-sen crosses above (from below) Kijun-sen, a buy signal is generated
    • When Tenkan-sen crosses below (from above) Kijun-sen, a sell signal is generated
    • A buy signal above the Kumo is considered a strong buy signal
    • A buy signal below the Kumo is considered a weak buy signal (take profit opportunity)
    • A buy signal in the Kumo is considered a normal buy signal
    • A sell signal below the Kumo is considered a strong sell signal
    • A sell signal above the Kumo is considered a weak sell signal (take profit opportunity)
    • A sell signal in the Kumo is considered a normal sell signal
  • Senkou Span A : (Tenkan-sen + Kijun-sen)/2 plotted 26 periods ahead
  • Senkou Span B : (Highest High + Lowest Low)/2 for the past 52 periods, plotted 26 periods ahead
    • When Senkou Span A and Senkou Span B are combined together they form the Kumo that acts as support and resistance
    • Prices above the Kumo find support at the Kumo
    • Prices below the Kumo find resistance at the Kumo
    • A thick Kumo implies high volatility and strong support/resistance
    • A thin Kumo implies low volatility
    • Prices above the Kumo identify an uptrend
    • Prices below the Kumo identify a downtrend
    • A very thin Kumo implies a reversal may be imminent
  • Chikou Span : Current closing price plotted 26 periods behind
    • A buy signal is generated when Chikou Span crosses above the close price 26 periods back from the current price
    • A sell signal is generated when Chikou Span crosses below the close price 26 periods back from the current price
    • Uptrend is confirmed when Chikou Span crosses above the Kumo
    • Downtrend is confirmed when Chikou Span crosses below the Kumo

Category: Technical Indicators

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