Trading the Cloud - The Chikou SpanWelcome to the next part of my ichimoku mentoring guide - Trading theCloud. In the first four parts of the guide I covered the basics of theKumo cloud and hopefully you are starting to build your knowledge ofthe ichimoku indicator. If you havent read the four parts of the Kumoguide, then I suggest you read it now before continuing.Now I want start talking about the Chikou SpanOk lets get started.The Chikou SpanThe Chikou Span is a very important part of the ichimoku indicator, it isoften overlooked by many ichimoku analysts and websites, Im not sure
why, as I consider it just as important as the Kumo cloud....Chikou Span translates as "lagging line"The reason the Japanese call this the lagging line is because the currentclosing price is 26 periods in the past, so it lags behind the currentprice.I know this can be a little confusing for some ichimoku beginners so Iwill explain this a little clearer.Look at this image below.When I say the Chikou span lags 26 periods in the past, the easy way tounderstand this is to see it as 26 candles in the past, as one candlerepresents one period.Some people often think there is a mistake with their chart when theysee the Chikou span for the first time, they often think that ichimokuhas not drawn the line properly or that the calculations are wrong, but Ipromise this is normal and no, your not going crazy...The Chikou span also mirrors price exactly. So we have anexact representation of price 26 candles in the past.
There is a perfect reason why the Chikou span is designed like this, itallows us to see how todays price action compares to the price action of26 candles ago.This is great for finding the trend direction and recognising strongsupport and resistance levels.so how does this work?1. If the current close price is lower then the price of 26 candlesago, this would indicate that there is a potential for more bearish priceaction to come, since price always tends to follow trends.2. If the current closing price is above the price of 26 candlesago, this would then indicate the possibility for more bullish priceaction to follow.Because the Chikou span lags 26 candles behind theprice,it makes this easy to check at a glanceThis chart below should hopefully explain it a little clearer.
Please make sure that you fully understand the concept of the Chikouspan, as this can be one of the main stumbling blocks when learning theichimoku indicator.Thats all for now, I will go into more detail in the next lesson so keepchecking back for updatesChris (admin)