How it is Being Used

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The Chinkou element offers enough confusion within traders than sometimes many of them chose to ignore it, and, when possible, even to delete it from the screen. Well, that is fatal mistake as the Chinkou is the most important element that from the Ichimoku Kinko Hyo indicator.

Because of the fact that it is lagging, so basically price is projected twenty six periods back in time, it is visible when looking at the current price action. However, when trying to back test a strategy or to do some research and looking back more in time, then things are becoming a bit difficult in the sense that one should be careful to consider all the time the twenty six periods that are being taking into consideration when trading with the Chinkou.

However, even so, the fact that the Chinkou is the only one that helps a trader take into account the time element and incorporate it in the trading strategy makes it extremely important.

The main thing to consider when trading with the Chinkou is to look for a reaction for the price in front of it. If Chinkou is below cloud and approaching price, the likelihood for the trend to the downside to continue is favored and the appropriate strategy to consider would be to go short by the time the distance becomes smaller and smaller. The opposite is true as well, what to do is to go long if the Chinkou is above the cloud and approaching the price in front of it.

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