Hey all so I see a lot of people talking about ichimoku, and I thought I would make an attempt to introduce it to you all.
I figured the best place to start is with a little history about it. Then Ill move onto some videos showing the system and we will break down each indicator, then Ill show you some setups.
I like Ichi because if you know anything about me I love trading with rules, and ichi can be set up as a rules based system, with low, med and high probability trades.
Well I hope I don't bore the shit out of you and you enjoy and learn something.
*** NOTE I DID NOT WRITE ALL OF THIS FROM SCRATCH I BORROWED INFO FROM WIKIPEDIA AND SEVERAL OTHER SOURCES***
Ichimoku Kinkō Hyō
So what the heck does "Ichimoku Kinkō Hyō" mean?
Ichimoku means: one glance, Kinko means: equilibrium (or balance), and Hyo means: chart.
So loosely translated Ichimou Kinko Hyu means "One glance equilibrium chart" or "Chart balance at a glance".
How can you use Ichi?
Ichimoku Kinko Hyu is a trend trading chart system that can be used in every tradeable market, if price moves up and down and its tradable then ichimoku can be used to predict its movement in a very unique way. Ichimoku uses a collection of indicators that work together to create a very visible system that enables the trader to see at a glance the low probability trade set ups, from those of higher probability.
Ichimoku shows you the whole story of the market, including trade direction, all the main support and resistance lines and if traded properly, you can find exact entry and exit points. It can also be used on all markets and all time frames. I use it on a 5 min and 15 min chart personally, but a lot of people prefer higher time frames, but as I have learned over time I am not that patient.
Where did Ichi come from. (this is actually a pretty good story)
Ichimoku was developed by a Japanese journalist named Goichi Hosoda, to his friends he was also known as Ichimoku Sanjin, which can be translated as What a man in the mountain sees. He spent thirty years perfecting the technique before releasing his findings to the general public in the late 1960s.
Goichi was an extremely talented yet quiet man, he spent most of his days locked away writing and reporting on the old rice trading markets, he understood how price moved and how it would react around certain areas of a chart, he soon discovered that price followed certain rules and they were due to what we now know today as Support and Resistance. Goichis aim was to create an all in one indicator that would help him view and analyse the charts in more detail but in less time.
So back in the 1930 needless to say there were no computers, in order to backtest and develop his system Goichi hired a large group of students who spent over 20 years manually backtesting the different formulas. Pretty freaking insane huh? In 1969 Hosoda finally finished the ichimoku kinko hyu charting method and presented his book to the Japanese public, it rapidly became the most frequently used indicator in all the Japanese trading rooms.
Even though ichimoku gained such wild popularity all across Asia, Ichimoku didnt make an appearance in the western world till the 1990's and even then because of the lack of translation and information, it was just seen as another weird charting method and most people just didnt have the time or passion to try and learn this strange looking exotic indicator.
Only now, in the early 21st century are westerners understanding the true power of this indicator.
In closing Hosoda strongly believed that the market was a direct reflection of human group dynamics or behaviour. He felt that human behaviour could be described in terms of a constant cyclical movement both away from and back towards equilibrium in their lives and interactions. Each of the five components that make up ichimoku provide its own reflection of this equilibrium or balance.
Next Section we will look at the different parts of the Ichi System.