Ichimoku Kinkō Hyō. The most powerful trading system?

Ichimoku kinko hyo aka Ichimoku cloud strategya

Ichimoku Kinkō Hyō the best kept Japanese secret, powerful strategy by Ichimoku Sanjin – Goichi Hosoda.

Inventor: Goichi Hosoda

Ichimoku trading strategy was developed by Goichi Hosoda 細田悟一 (1898-1982) later know as Ichimoku Sanjin 一目山人. Japanese economic journalist at Miyako Newspaper later Tokyo Newspaper (1942). Hosoda spend 30 years on developing his system before deciding to publish his first book in 1969. Later published 6 extra volumes – 7 in total before he died in 1982. Books are an attempt to pass onto the next generations of traders his findings of 50 years, years of full-time devotion to one cause. it’s a true masterpiece. No wonder there are no translations of his original books and last two volumes are discontinued even in Japan. Did he find too much, is the possession of this knowledge too powerful?  

Let’s start with the

ICHIMOKU INDICATOR

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

Ichimoku Kinkō Hyō indicator MT4
USE CLASSIC ICHIMOKU SETTINGS 9-26-52

There was/is a lot of attempts of tweaking this numbers and I’ll write separate articles on the matter and share my discoveries wether you should change classic ichimoku settings or leave them the way they are. The old school originals work like a charm in most cases and there is no need of changing anything  for now. Besides, these are the settings that most traders would have and we want to see what any other Ichimoku trader is looking at at. If you are into Cryptocurrency trading with Ichimoku then you should watch my VIDEO where I’m playing with this numbers a bit to see what should or could be used.

ICHIMOKU LINES

After correctly installing Ichimoku Kinko Hyo Indicator You will see 5 lines of which two form the so-called Ichimoku Cloud although the correct name would be rather Ichimoku resistance band. I made a separate dedicated to the topic VIDEO which you can watch on my YouTube channel. 

Now 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

ENG:  Conversion line. 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

Ichimoku Kinkō Hyō indicator Tenkan Sen

Kijun-Sen 26

Represents mid-term investors

Eng: Base line. 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

Ichimoku Kinkō Hyō Kijun-sen aka conversion line

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. 

ichimoku cloud Chikou span

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. If you want to get serious about trading with Ichimoku Kinko Hyo I would highly recommend taking my ADVANCED COURSE 

Ichimoku cloud Kumo

Three Ichimoku 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. 

Ichimoku Kinko Hyo Targets :

E = B+(B-A)

V = B + (B-C)

N = C + (B-A)

NT = C + (C-A)

4E = B + 3 × (B-A)

There is a couple more which I’m describing closer in my Advanced Ichimoku Kinko Hyo course.

ichimoku cloud Targets

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

ichimoku cloud target and time theory

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 then 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 kinko hyo trading strategy. Ichimoku Cloud itself is just a drop in the ocean. 

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