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Technical Analysis of Forex Trading with Ichimoku Kinko Hyo: USDJPY Monthly Chart with ichimoku cloud which using time cycle, wave pattern & price target observations together with ichimoku. Perhaps this is more advance technic of using ichimoku.
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"03/24/2008
USD/JPY Monthly Chart With Ichimoku Cloud
Hello!
Today I will analyze the monthly chart of USDYen using Ichimoku Kinko hyo.
Please take a look of this chart.
A striped pattern is "senkou-supan".
A red line is "kijun-sen".
A blue line is "tenkan-sen".
A white line is "chikou-supan".
Ichimoku Kinko hyo consists of three main theories which are ''Time cycle, wave pattern and price target observation. ''
Let me explain about the time cycle theory first.
The reason why I started to explain about this theory first is because this is the most important theory when you study Ichimoku Kinko Hyo.
What is the time cycle theory, then?
When the price moves, it looks like it moves randomnly.
However, the founder of ichimoku Kinko hyo, Mr. Ichimoku, turned his attention to the pattern of the price movements, especially when the price hit the highs and lows.
In order to find out the specific patterns to establish the market cycles, he studied about what is ''number'' and how it is made of, how different countries/cultures use numbers in different ways.
As a result, it took him four and half years to find out that the numbers 9, 17 and 26 have something to do with the law of nature and he decided to use them as a base on the ichimoku standard numbers.
I have attached the table of those standard numbers at the top of this blog so that you can print it out for the future use.
Let me show you an example of how to apply those standard numbers on the actual chart.
If you look at the monthly USD/Yen chart, you can see the light blue and green lines which show the period of 55, 53 and 49 months.
The first wave, 55 months, started from April 1995 when USD/Yen reached the low of 79.75 and ended on Nov.1999 when it hit the low of 101.22.
The next wave, 53 months, ran between the Nov.1999 low and the March 2004 low of 103.39.
Currently we are in the ongoing third wave and this month, March 2008, is its 49th month from the last low of March 2004.
Once you start using the Ichimoku time theory to analyze the time cycle, you will come up against the moment that the duration of highs and lows are different from the Ichimoku standard numbers.
In fact, the three waves I have just introduced to you on the USD/Yen monthly chart are not the standard numbers at all.
When you encounter this kind of situation, Mr. Ichimoku suggests to use the different mothod, called ''Equal numbers''.
For instance, the three waves I introduced earlier consist numbers of 55, 53 and 49.
When you apply the equal number method into those three numbers, the third wave (49th months) can extend up to 55 months.
If this assumption is correct, the 55th months on the third wave will be in September 2008.
Next we will examine two yellow lines, one with 107 months and other with 101 months.
Even though 101 is one of the Ichimoku standard numbers, I want to use the equal number method on this occasion.
The reason is that 107 months is the period of two major tops of the last decade; ie. between August 1998 top of 147.68 and the recent top of 124.14 on June 2007.
If and when the current 101th months' yellow line extends into 107 months, it will fall in September 2008.
I would also like to emphasise the fact that the ongoing yellow line connects the two major lows for the last decade, as well.
Finally we will examine the pink lines.
The first one lasted for 82 months and we are right on the 75 months (March 2008) on the second pink line which is still in progress. The nearest Ichimoku standard number is 83.
When you apply the equal numbers (82) into the ongoing pink line, the 82nd month will be October 2008.
Don't you think those three results based on different sets of the equal numbers method are very similar (September or October this year)?
This is the beauty of the Ichimoku time cycle theory.
So,
I will now show you the price target observation.
Please take a look at the top yellow line (107 months) which connects two tops for the last decade.
The difference between August 1998 top of 147.68 and the recent top of 124.10 on June 2007 is -23.58 yen.
The ongoing 101th months' yellow line started from the Nov. 1999 low of 101.22.
101.22 minus 23.58 = 77.64
Did you find Ichimoku kinko hyo interesting?
I hope you enjoy reading my blog.
See you next time! "
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