Ichimoku Kinko Hyo

[Soultrader 12]

Any traders use this interesting tool I came across today?

 

"Originally developed by Goichi Hosada pre WWII, a newspaper journalist (published in 1969) who wanted to develop an Uber-indicator that could provide the trader with various levels of support/resistance, entry/exit points, direction of the trend, and strength of the signal."

 

What I particulary found interesting was the use of 2 moving averages. The 9 period and the 26 period. However, instead of using the close it uses the midpoint of the spread of the bar. The indicator itself has further rules to it as it uses "clouds" as support and resistance.

 

Below is a snapshot:

 

 

Now, I am not fan of indicators as I only rely on order flow through tape with futures. However, some of the techniques I use in futures can not be applied to equities in Japan.　Therefore, I have been looking around something more automated.... hence the search of this tool. I have been testing around with the moving averages (Ichimoku version) and have surprisingly found some useful setups. I was wondering if anyone is familiar with them and can comment on them?

[Nick1984 10]

From what I've heard the indicator works best on longer time frames mainly daily and weekly. The cloud is basically meant to be a "momentum" type indicator. If price is inside it then you have non trending conditions with the boundaries of the could being support and resistance.

 

In your chart price stays outside of the cloud most of the time. When the price is below the cloud the two levels form two different resistance levels and vice versa when price is above it.

 

I take it in your chart the purple line is your Chinkou line? Thats your signal line, if it crosses through the cloud from the bottom thats a long signal and vice versa. Works similar to a MACD or RSI style entry signal.

 

The Kijun is sort of a trend strength indicator but I'm not 100% sure of that.

 

Personally I think it's a very messy looking thing and I'd probabbly give myself cataracts looking at that all day. I don't know whether it is better in equities markets than in futures markets. If you're looking for a more "automated" entry signal than I guess that it could work because the rules for this indicator are quite easy to follow but some rigorous back testing to see its long term win/loss and estimated profits are.

 

Don't know if thats the type of response you're after but hope it helped.

[Soultrader 12]

That chart is actually one I just took off the net. Picture that chart without the clouds and only the custom 9,26 MA. Im looking for crossover setups combined with support and resistance levels and perhaps candle patterns.

[Nick1984 10]

The benefit of the crossover setups is in the way the MA's are actually calculated compared to other MA's. I see them as "truer" MA's than your regular MA or EMA. I still feel that it is better on a longer term time frame. Intra day the signals of the cross overs would be way to late to be meaningfull.

 

If you're trading the equities intraday you can use them to confirm a move once entered, however I'd mostly use candlesticks and basic market generated information to get my signals. Tape is all right on a stock but the L2 I don't trust.

[Soultrader 12]

The benefit of the crossover setups is in the way the MA's are actually calculated compared to other MA's. I see them as "truer" MA's than your regular MA or EMA. I still feel that it is better on a longer term time frame. Intra day the signals of the cross overs would be way to late to be meaningfull.

 

If you're trading the equities intraday you can use them to confirm a move once entered, however I'd mostly use candlesticks and basic market generated information to get my signals. Tape is all right on a stock but the L2 I don't trust.

 

Yes, that is one of the biggest problems I encountered with some Japanese stocks. The information through tape and Level 2 can not be trusted. I can not rely on momentum off the tape (order flow, etc...) and due to the nature of stock in Japan which tend to gap every single day based off US markets, market profile (in terms of value area) is not efficient. I have a couple other theories I am currently testing out but will need some sort of indicator to confirm price action. Volume relative to price action has been extremely hard (almost impossible) to read intraday as well.

 

I am going to explore further the usage of these custom moving averages and will keep traders posted for those that may be interested.

[Nick1984 10]

Now my understanding of Japanese markets is scant at the moment (I'm planning on leanring more about them next year) but some of the scenarios you say occur here as well in Australia. Our stocks do gap up or down significantly off the tails of US action however I've managed to notice that underlying markets drive the individual stocks so I watch those closely.

 

The best example I can give is the mining sector. Our biggest stocks are all miners like BHP Billiton, Rio Tinto, Newcrest, Paladin etc... This is where a bit of fundamental analysis comes into it. I like to find out a bit about the stock and what mining sector they specifically operate in i.e: are they gold miners, uranium miners, nickel, iron, zinc etc...

 

I like to keep an eye on the underlying price of their main resource as the stocks do track these markets quite closely. Uranium prices over the past 8 or so weeks have dropped off from $135 US/pound to $90 US/pound of U308.

The drop in Uranium prices has effected my uranium mining stocks. Even though over the last week the domestic SPI has recovered from the fall, the downward trend of uranium prices on world markets has been pulling back on general Uranium stock price recovery.

 

That being said, the same situation may occur in Japan. Granted in Japan there are not so many mining industries as here in Australia but the principle still applies. I think that you can get better clues to market movements in your domestic equities markets by doing a bit of research on the individual stock and then its key stake holder and subsidiary markets. This can help you gague the strength of a move against a highly correlated market and is free from the bias of Tape or L2.

 

If you use somehting similar in combination with a simple MA crossover you might be able to start spotting some incresingly obvious combinations which can help generate both short and long term long/short signals.

 

Hope that helped

[trader273 10]

Found these files one day. Not exactly if it is helpful or not, but nonetheless its what I got.

Ichimoku.rar

[Rashedbgd 10]

Any traders use this interesting tool I came across today?

 

"Originally developed by Goichi Hosada pre WWII, a newspaper journalist (published in 1969) who wanted to develop an Uber-indicator that could provide the trader with various levels of support/resistance, entry/exit points, direction of the trend, and strength of the signal."

 

What I particulary found interesting was the use of 2 moving averages. The 9 period and the 26 period. However, instead of using the close it uses the midpoint of the spread of the bar. The indicator itself has further rules to it as it uses "clouds" as support and resistance.

 

Below is a snapshot:

 

 

Now, I am not fan of indicators as I only rely on order flow through tape with futures. However, some of the techniques I use in futures can not be applied to equities in Japan.　Therefore, I have been looking around something more automated.... hence the search of this tool. I have been testing around with the moving averages (Ichimoku version) and have surprisingly found some useful setups. I was wondering if anyone is familiar with them and can comment on them?

 

Excellent comment, it is very useful for me.