Ichimoku Kinko Hyo PRO

Ichimoku Kinkō Hyō 一目均衡表

Inventor: 

Ichimoku trading strategy was developed by Goichi Hosoda (1898-1982) later know as Ichimoku Sanjin. Japanese economic journalist at Miyako Newspaper later Tokyo Newspaper (1942). Hosoda spend 30 on developing his system before he decided to publish his first book. Later publishing 6 extra volumes before he died in 1982. Books are an attempt to pass onto the next generations of trader his finding from 50 years, 50 years of full-time devotion to one cause. If it’s not a masterpiece, then what is? No wonder there are no translations of his original books and last three volumes are discontinued even in Japan. Did he find too much, is the possession of this knowledge dangerous?  

Find out more about joining Ichimoku Club. 

Let’s start with the

Indicator

Known to every Ichimoku cloud trading strategy fanatic Ichimoku Indicator available for MT4 (Metatrader 4)   INSERT—>INDICATORS—>—>ICHIMOKU  KINKO HYO

Ichimoku Kinko Hyo indicator Meta trader 4 MT4
Ichimoku indicator applied onMT4 Chart

Download my free Ichimoku template for MT4 here

Use standard settings 9 – 26 -52

There was/is a lot of attempts of tweaking this numbers but the old school originals work like a charm and there is no need of changing anything there. Besides, these are the settings that most traders would have and we want to see what the majority looks at too. 

You will see 5 lines of which two form the so-called Ichimoku Cloud. Let’s have a look at all 5 of them before we move to Three Theories to complete the very basics of this system.

Tenkan-sen 9

Represents short-term investors. 

The red line on a chart. Created by adding the highest high and lowest low from past 9 days/periods and dividing it by 2. (

Formula: (9-period high + 9-period low)/2

Kijun-Sen 26

Represents mid-term investors

The blue line on a chart. Created by adding the highest high and lowest low from the past 26 days and dividing it by 2. 

Formula: (26-period high + 26-period low)/2

Chikou-span 

So-called lagging span. The current price represented in a line chart style moved 26 periods back. It’s constantly drawing on a chart while the price moves but will close its period at the close of a day. To draw it you would only read the close value of the price. 

Kumo – The Ichimoku Cloud 

Simply a resistance or support level. Hosoda didn’t call it a cloud, for him it was just a resistance level, where the price will struggle to go through and once inside of the space between Senkou Span A and B he would never place a trade. “The view is not clear” he would say. 

Senkou span A 

Leading span 1 = {(Tenkan-sen + Kijun-sen)} /2} plotted 25 days ahead (that is, 26 days ahead including the current day)

Senkou span B

Leading span 2 = {(highest price over the past 52 days + low price from 52 days)} /2} plotted 25 days ahead (that is, 26 days ahead including that day)

And that is how you draw Ichimoku cloud. Easy. It took Hosoda 2 years to calculate values of Tenkan-sen and Kijun-sen only.

This is where most articles about Ichimoku trading strategy will stop. But there is so much more to it. Even this article is just scratching the tip of all Hosoda’s findings. We study deeply everything in the Ichimoku Club

Three Theories: 

Wave Theory

Although Ichimoku Sanjin was aware of Elliot Wave theory he comes up with his own using Latin alphabet letters to describe them. 

There are 6 Waves: I, V, N, P, Y, S 

Latin letters represent the shape of the wave on the chart. 

  • I wave A single bearish or bullish impulse 
  • V wave The market price to rise and fall or fall and rise forming shape of V.
  • N wave The market price to raise / lower / raise or opposite in Bearish market.
  • P wave A market where the highs fall and the lows rise as time passes. Flag or triangle.
  • Y wave The market price where the high price rises over time and the low price declines over time. Expended triangle. 
  • S wave A market price where the lowered price rebounds and rises at the previous high level. Opposite in downtrend, then wave looks more like Z

Price Targets  observation Theory

The method of calculating the following five calculated values is based on a rising market price that rises from low A to B and drops from  B to C. Therefore, point C is higher than A. Applicable to bearish market as well with the reversed picture. 

Targets :

E = B+(B-A)

V = B + (B-C)

N = C + (B-A)

NT = C + (C-A)

4E = B + 3 × (B-A)

Time Theory

Everything is happening in time and time is 10 times more important than the price level. 

Kihon sūchi 

9,17,26,33,42,51,65,76…

We have basic numbers like 9, 17, 26 which can make all the other numbers. 33=2×17-1 or 76=26×26-2

These numbers represent the length of the wave which should repeat itself in the nearest future which helps to determine the point in time when market will change its direction.

Taitō sūchi  – Equal value 

Wave time length might be different than one of Kihon sūchi numbers but still repetitive in the future. This might be numbered like 14, 29, 36 etc.

Time theory must be combined with wave theory and Price targets theory on Ichimoku chart to create one POWERFUL ichimoku trading strategy.

As you can see there is a lot of components to ichimoku cloud trading strategy and cloud itself is just a drop in the ocean. That is why I decided to create Ichimoku Club for all of us who want to trade using this wonderful and sophisticated system.

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