Ichimoku Kinko Hyo trading system...!

Camel, I've been using the ichimoku for a little over 3 years. I was suing it for a year or more before I even experimented with the settings. To this day, it is still set on the default (9,26,52). I figure if it works , don't change it.
The bottom line is the lower the MA's the faster they move, which also means the faster they will deliver a signal. The faster the signal is delivered, the higher the probability of getting a false signal.
Another sneaky little secret I learned is that all the traders I know that use the ichimoku as a standalone indicator all use the the default settings. The one that taught me the usage of it uses it as a standalone and the default settings.

Are all of those traders successful; turning profits nearly every quarter?

Yes, I understand how the lower the lookback, the faster the move.

My post wasn't so much about the periods used, but rather about what makes sense as far as the cloud.

Let me try explaining again.

What do you see when you look at the cloud and price?
You see of course price represented in candles or bars and then you see two averages that have been shifted x periods ahead. Then you have Chikou Span that is x periods behind. So when price gets to the cloud, you're seeing prices relationship to two moving averages that are from x periods ago.

So again, the whole idea of the cloud is that you're seeing two moving averages shifted x periods ahead so that means when price meets up with the cloud, you're actually seeing the averages of price from x periods previously.

Then of course you have TS/KS that are two moving averages aligned with price.

Isn't that what you are seeing when you compare chikou span to TS/KS? When the chikou span interacts with TS/KS, you're are really seeing price (in the form of the close) interacting with two moving averages x amount of periods ago.

Regular Ichimoku Setup - Note the location of price compared to the cloud.



Cloud shifted back with TS/KS. 4 moving averages are redundant and unnecessary IMO. Leave them in you prefer though.


TS/KS taken out with the cloud still shifted back. The information that we saw previously between price and the cloud (regular ichimoku setup)
can still be seen using the Chikou Span and the cloud moved back. It gives the trader the same exact information in a simpler format IMO.

In other words, all of the information that we gather from the regular ichimoku setup is still seen in this setup (minus TS/KS but add them if you want to).
If there are two solutions that give the same information, but one is simpler, then the simpler solution should be used.


Does this make sense? Occam's Razor anyone?

If you want 3 averages, then half the cloud (ssa+ssb) / 2)) makes the most sense.

I hope someone is following me here.

If you shift anything forward, it should be CS.
This eliminates looking back x periods for CS and the traders focus can
be in the same area at all times; current price action.

Now, instead of looking for CS to cross above/below price, you simply look
for price to cross above/below CS.

Same exact information, seen in a simpler, more efficient way IMO.

@Camel

Nice to see u here after such a long time.

I think problem starts when people dont like to see ichi as a total picture. Most want trade signals which are simple and easy to act upon. One of the easy way is to use the cloud as directional filter and KS and TS as moving average crossovers to generate signals. Unless we have a strong trend on higher time frame, trade location is mostly at a disadvantage and whipsaws will make sure trader ends at break even or at loss.

When we want to see the total picture, understanding what each line represents is important. CS is a simple line chart that gives us 90% of the info we need. TS tells us the midpoint of the last 9 sessions. KS is the midpoint of the last 26 sessions. Both represents value of those periods. IF a new high is made, it lifts the midpoint higher on both these lines, meaning those higher time frame guys are willing to buy high with the hope of selling higher. Both TS and KS are a way of plotting a shift in mindset over a higher period of time. Nothing more.

Now coming to the way cloud is constructed. Those smart Japs used to have saturday as a trading day. so 6 working days, one and a half week was 9 period. 26 sessions was one month and 52 was bi monthly.

What he wanted was a way to know how we are doing today compared to previous 2 month from the current month. The mid point of TS and KS of today will be one reference point for a session one month from now. The midpoint of the highest high of the last 2 months and the lowest low if the last 2 months will be the second reference point for a trading session one from from now.

So in essence, we have sentiments of traders now (CS), one and a half week (TS) one month (KS) 2 month (Cloud).

Its the best multi time frame system i have seen till date.

what u are doing here is comparing price now with what it was n periods back.

CS is designed to give us support and resistance and trend lines.

Think from our decision point of view. What we need to know is where the buyers are aggressive (support) where the sellers are agressive (resistance), how is the deck stacked up against the participants ( bigger picture, read higher time frame). Have the aggression gone (flat KS / TS means no new high/low made) How strong are the sentiments compared to last 2 months ( Cloud). Where should i enter (long above known support or short below known resistance) .

Problem is, when u want arrows to point u when to trade. There is no escape from taking responsibility for a trade. We need to know the current structure and then select a good trade location and then pray our stops dont get hit.

chart is self explanatory....!

Linkon, you shared something I did not know, and that was the 6-day work week for the Japanese, thus, the 9, 26, and 52 readings. I always looked at it terms of 26 being an approximate completed cycles for most markets, the 52 doubling up, thus, a view of 2 completed cycles and its history. As was mentioned in the other post, those settings always worked for me, so it never occurred to me to change it.

Camel, in order to answer your one question in referring to the trades that use the ichimoku as a standalone, they are all full-time traders, so yes, I can only conclude they are doing very well.
OTT, I was going to answer your question, but Linkon already did it with his usual outstanding job.

Let me add one small thing. The ichimoku is a holistic indicator. By taking away any part of it, because it looks simpler, takes away the effectiveness.
The one example you gave was the cloud being cut off in the future. IMO, you have cut off part of the road map. It is part of the overall landscape of price movement within that TF.

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Here's the hourly chart for Nifty. The candle has been camped under the cloud for quite awhile, so it is fresh. The future of the cloud is showing the strong bearishness, which shows yesterday's strong move north is probably only temporary. Also, the chinkou is still camped under the candles, which is an additional indication that yesterday's strong move may only be a mirage.

This is how i see the same hourly chart....!



I prefer having a setting that reflects a higher time frame on the chart, so 7 bars for TS (daily TF) , ks gets 14 (2 days TF ) and 35 bars for cloud(weekly TF)

The pivot point (red line) that lead to a new range extension is 4911. This level was crucial as it was a support on 2 occasion and had turned resistance on the last occasion. Any further downside will be on break of this reference level only. A bar close below this is only when i will go short and not before that.

On CS, i can draw a trend line (green) and till the time the pivot (4836) that gave rise to range extension is violated, i have no reason to exit my longs.

Momentum always precedes price and there was a clean divergence on rsi and the break of pivot high on the was a clean invite for a long trade. It is still trending up and has not shown any sign of weakness, so no reason to exit long positions.

My daily value ( TS) is above 2 days value (KS) and both are rising. My weekly Tf is at 4996 and the trend decider ( TS+KS / 2 of the last week ) is now at 4908.

stoch is at 94 and trend cycle is showing signs of maturity (read sk and sd crossover) and this is the second bar above the 80 mark. 3 more bars (hours) above this 80 mark and i can expect a trend continuation.

RSi is just below the 60 mark and there is plenty of room on the upside.

Overall, buy was generated a day before on the CS, confirmed by divergence on rsi and stoch. This long was a clean hold even today. Nearest reference lvl is at 4911 and then 4836. So any retracement to this lvl is a invite for add to long positions.

Appreciate the warm welcome, Linkon!

I thnk we can agree to disagree on this one. I completely understand and have taken in what both of you have said. I still see my last example in my first post as giving the same exact information, in a simpler view. It is still giving the whole picture.

Price + cloud = CS + cloud, shifted 0 periods ahead

CS is still giving the same information.
Price is still giving the same information.
Price is still giving the same information in relationship to the cloud via CS now.
Keep TS/KS in if you prefer 4 moving averages. They are still giving the same information.

There is no point in shifting the cloud forward when you already have price (in the form of CS)
shifted back.

I understand my second example with CS shifted n periods ahead is pushing it. As Linkon mentioned it's harder to construct S/R using CS that way. However, it's pretty easy to see S/R using regular price itself.