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I saw this indicator on Dailyfx.com
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//////////From Dailyfx.com///////////////
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What are Ichimoku charts?
Ichimoku charts are trend following indicators that can be used in a
way similar to moving averages to generate trading signals and
identify support and resistance levels. A key difference however is
that Ichimoku chart lines are shifted forward in time, which allows
for wider support and resistance zones and decreases the risk of
trading false breakouts.
The Ichimoku study conveys a great deal of information on trend
existence, direction, support and resistance. It is comprised of
four main lines:
Turning Line = (Highest High + Lowest Low) / 2, for the past 9 days
Standard Line = (Highest High + Lowest Low) / 2, for the past 26
days
Leading Span 1 = (Standard Line + Turning Line) / 2, plotted 26 days
ahead of today
Leading Span 2 = (Highest High + Lowest Low) / 2, for the past 52
days, plotted 26 days ahead of today
How are they used?
Much like a moving average crossover strategy, Ichimoku charts
generate a buy signal when the Turning Line crosses the Standard
Line from below, and a sell signal when the Turning Line crosses the
Standard Line from above.
In addition, the blue shaded area that is formed between Leading
Spans 1 and 2 is known as a cloud, and defines support or
resistance. Clouds not only act as support or resistance, they also
help to identify trend direction. When prices are above the cloud,
the trend is up; similarly when prices are below the cloud, the
trend is likely down. Below is an example of an Ichimoku chart
applied to USD/CHF:
<IMG src="http://www.refconews.com/images/weekly_050205_01.gif";
alt="Indicator Chart">
//Can you post images on Yahoo Groups?
FUNDAMENTAL TRADING STRATEGY
Theory suggests that currencies trading at a forward discount should
depreciate over time
In practice however, the opposite is true, giving rise to a forward
rate bias that generates potential trading opportunities
What is forward rate bias?
Economic theory on exchange rates begins from the assumption that FX
markets are efficient—specifically, spot rates price in all
available information. As a result of this efficiency assumption,
today's forward rate (price specified today for delivery of a
foreign currency at some point in the future, e.g., 1 month, 3
months, etc.) should perfectly predict the future spot exchange
rate.
According to theory, currencies trading at a forward discount (i.e.,
currencies offering higher yields) should depreciate towards the
forward rate over a given time period. Similarly, currencies trading
at a forward premium (i.e., currencies offering lower yields),
should appreciate towards the forward rate over a given time period.
In practice however, reality looks much different. Observing spot
and forward rates over time, currencies tend to trade in an opposite
way to what theory suggests. In other words, currencies trading at a
forward discount actually appreciate, not depreciate over time.
Likewise, currencies trading at a forward premium will tend to
depreciate, not appreciate over time. Therefore, forward rates do
not perfectly predict future spot rates and can be said to be biased
estimates. Hence the term forward rate bias.
Why does forward rate bias exist?
Several explanations have been proposed to explain why the forward
rate bias exists. One theory is that currencies trading at a forward
discount are riskier than those trading at a forward premium. As a
result, investors require additional return to hold these currencies
and assume these greater risks. The appreciation of currencies
trading at a forward discount represents the reward for assuming
these risks.
Another argument holds that bias exists because investors'
expectations are not being fulfilled. In other words, while traders
may expect a specific event or policy shift that affects the
exchange rate, this event may never occur, or may happen long after
it is expected. This theory is known as the "peso problem,"
taken
from the path of Mexican peso rates in the 1970s. While the market
expected a devaluation and reflected this view through a forward
discount, policymakers artificially maintained the value of the peso
so that it was not devalued until many years after it was expected.
Why is it important?
The existence of forward rate bias represents a potential
opportunity for traders to exploit. In fact, this is the main driver
of the carry trade whereby investors earn an interest rate spread by
buying high-yielding currencies while selling low-yielding
currencies. This strategy of going long currencies trading at a
forward discount while shorting currencies trading at a forward
premium is exactly what would be recommended by the forward rate
bias and can be shown to generate excess returns over time.
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//////////Convert to AmiBroker///////////
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TurningLine = (HHV(P,-9) + LLV(P,-9)) / 2;//This line is converted
StandardLine = (HHV(P,-26) + LLV(P,-26) / 2 ;//This line is converted
LeadingSpan1 = (StandardLine + TurningLine) / 2, plotted 26 days
ahead of today // This line is ***NOT*** converted
LeadingSpan2 = (HHV(P,-52 + LLV(P,-52) / 2, plotted 26 days ahead of
today //This line is ***NOT*** converted
//How do you plot the LeadingSpan 1 & 2 26 days ahead?
//Please help me if you can
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![http://www.refconews.com/images/weekly_050205_01.gif"](http://www.refconews.com/images/weekly_050205_01.gif"){kind=link}