Ichimoku Kinko Hyo, commonly referred to as Ichimoku, is a technical analysis tool that was developed in Japan by a journalist named Goichi Hosoda. It is a popular indicator among forex traders as it provides a visual representation of support and resistance levels, trend direction, and momentum. In this article, we will explore which forex pairs work best with Ichimoku and why.
The Ichimoku indicator consists of five lines that are calculated using the highest high and lowest low over a specified time period. These lines are:
1. Tenkan-sen (Conversion Line): This line is calculated by averaging the highest high and lowest low over the past nine periods.
2. Kijun-sen (Base Line): This line is calculated by averaging the highest high and lowest low over the past 26 periods.
3. Senkou Span A (Leading Span A): This line is the average of the Tenkan-sen and Kijun-sen and is plotted 26 periods ahead.
4. Senkou Span B (Leading Span B): This line is calculated by averaging the highest high and lowest low over the past 52 periods and is plotted 26 periods ahead.
5. Chikou Span (Lagging Span): This line is the current closing price plotted 26 periods behind.
Now that we have a basic understanding of the Ichimoku indicator, let’s explore which forex pairs work best with it.
1. USD/JPY
The USD/JPY is one of the most popular forex pairs to trade with Ichimoku. This is because the Ichimoku indicator was developed in Japan and is widely used by Japanese traders. Additionally, the USD/JPY is known for its strong correlation with the Japanese stock market, making it a popular choice among traders who use the Ichimoku indicator to trade stocks.
2. EUR/USD
The EUR/USD is another popular forex pair to trade with Ichimoku. This is because the EUR/USD is the most heavily traded currency pair in the world, making it a popular choice among traders who use the Ichimoku indicator to trade currencies. Additionally, the EUR/USD is known for its strong correlation with the stock market, making it a popular choice among traders who use the Ichimoku indicator to trade stocks.
3. GBP/USD
The GBP/USD is another popular forex pair to trade with Ichimoku. This is because the GBP/USD is the third most heavily traded currency pair in the world, making it a popular choice among traders who use the Ichimoku indicator to trade currencies. Additionally, the GBP/USD is known for its strong correlation with the stock market, making it a popular choice among traders who use the Ichimoku indicator to trade stocks.
4. AUD/USD
The AUD/USD is another popular forex pair to trade with Ichimoku. This is because the AUD/USD is known for its strong correlation with the commodity market, making it a popular choice among traders who use the Ichimoku indicator to trade commodities. Additionally, the AUD/USD is known for its strong correlation with the stock market, making it a popular choice among traders who use the Ichimoku indicator to trade stocks.
5. USD/CAD
The USD/CAD is another popular forex pair to trade with Ichimoku. This is because the USD/CAD is known for its strong correlation with the commodity market, making it a popular choice among traders who use the Ichimoku indicator to trade commodities. Additionally, the USD/CAD is known for its strong correlation with the stock market, making it a popular choice among traders who use the Ichimoku indicator to trade stocks.
In conclusion, the forex pairs that work best with Ichimoku are the ones that have strong correlations with the stock market, commodity market, and Japanese market. These forex pairs include USD/JPY, EUR/USD, GBP/USD, AUD/USD, and USD/CAD. However, it is important to remember that no trading strategy is foolproof, and traders should always use proper risk management techniques to protect their capital.
