Ichimoku Trading System

[unhommefou]

I have actually back tested this system versus USD/JPY, EUR/USD, USD/CAD, USD/CHF, GPD/USD, and USD/SGD (more testing to follow on other pairs), and I have to say this system...actually...works...

Which is surprising, because many of the systems that I find in many message boards tend to fall flat on their faces

The parameters of my test were from 1970-2008, Daily bars, and the standard Ichimoku cloud settings of 9,26,52.

Also, I tested originally without the Chikou Span Line (by accident). Once I added the Chikou Line, the results of the test actually got worse by a few percentage points.

Now just need to make this into an automated system, and go from there

I will post actual snapshots of the backtesting results later.

Originally Posted by currency tunes

I have been a regular to babypips from quiet some time and have learnt a great deal from all of you.

I have been trading currencies for past 4 years. It has been a very rewarding experience for me emotionally as well as financially.

I would like to share with you all, a great trading system I have been using.

Kinko Hyo has always been a great visual guide to the market for the traders.
I shall not go into the great details of ichimoku. You can use IchiWiki to see how the ichimoku is constructed. Here, I try to explain the system I have been using with great success for past 2 years.

Success in trading comes to those, who are patient and wait for the right price at the right time to enter a position.
The trading system, am explaing here requires you to wait for "right price at the right time"

Rewards are great, if you learn to be patient. This system can make you thousands of pips in a month. You just have to wait for the right time.

Success rate is about 90% (may be more, there are hardly any losing trades!!).

I use this system only on Daily Charts. (May be it works on hourly but I haven't tried).

So, here it goes:

Pair: Any currency pair.

Time Period: Daily (I use GMT for market open/close)

Tenkan Sen : Green

Kijun Sen : Red

Chikou Span (Lagging Line) : Purple

Cloud : Blue

Entry Signal:

To SELL:

Condition 1: Tenkan Sen below Kijun Sen.
Condition 2: Chikou Span below the Price Line.
Condition 3: Current Price below the Cloud.

To BUY:

Condition 1: Tenkan Sen above Kijun Sen.
Condition 2: Chikou Span above the Price Line.
Condition 3: Current Price above the Cloud.

As soon as ALL 3 conditions are satisfied, enter into the position at the open of next candle. Use 2 lots to enter the position.

EXIT:

To exit, we use Chikou Span (the lagging line).

Mark supports and resistance on the Chikou Span line, just as you would do for the price line.

For LONG position: The support on Chikou Span right below the price you enter is your STOP LOSS level.
The resistance on Chikou Span right above the price you enter is your TAKE PROFIT level.
And vice versa, for SHORT position.

For example, in the chart attached, you can see 1.3985 as my profit target on EUR long position. And, 1.3600 is the stop loss level

If your stop loss level is reached (which is very unlikwly), get out of your 2 lots.

If you take profit level is reached, take out 1 lot and let the other lot run with a trailing stop loss.

As you can see the EUR chart attached, after giving the ENTRY signal at 1.3712, the price after hitting first target of 1.3985, went as high as 1.4700

Well, this is my simple trading system
Everyday, I scan all the currency pairs for this formation on daily charts and enter a position with above mentioned rules.

Only last week, I entered EUR/USD ; USD/CHF and an asian currency USD/SGD, all 3 pairs earning me thousands of pips in a matter of 2 days.

I would appreciate any feedback or questions about this system
Also any suggestions to improve the system are welcome.

I have also started updating all trades that I enter based on Ichimoku Trading System on MeetPips.com — Private Beta and you can find me there with the user name Dealing Room.

PIPS FOR YOU

[baby24]

Originally Posted by unhommefou

Now just need to make this into an automated system, and go from there

I will post actual snapshots of the backtesting results later.

Any news on this? Any details on the backtests available? How did you do these, just visually scrolling or by program?

Thanks and "sorry" for all my questions

Baby24

[unhommefou]

I have been very busy as of late, so I kinda accidentally forgot to update everyone with the back tested results of the system.

The backtest did not take into account the Chousu Span line (the lagging 26 day one), but even then, it did better than I had every dreamed this system could do.

It actually beat out other systems that I had been testing as well (including the world famous "Turtle System", the 350 Bollinger Band System, and even some system by a person on this board named Icycloud.

However, the system works BEST with a longer time frame. Daily did better than Hourly, and Weekly worked the best.

I am just going to show the daily results though.

The platform that I used for the backtest was Ninjatrader.

I purchased Forex data via a third party service (both Intraday an daily).

The results are coming, and sorry about the wait!

[baby24]

Thanks for your speedy reply. Did you use futures or spot? Any stoploss involved?

Thanks

Baby24

[unhommefou]

Okay, when I did the backtest, I simplified the system down because I misunderstood the intentions of the original poster. The results of his version of the system will be coming, but it will be a while. I am not a full time trader [yet], and my job takes a lot of my time.

So, here is the simplified system:

Instead of using the Chousu Span Line as support/resistance, I did not use it at all.

The only thing I really did was...

If Tenken Line > than Kijun AND both are above the cloud, get in.

If you are in a position Long, and Tenkan crosses Below the Kijun, get out of long.

If Tenken Line < Kijun Line, and both are below the cloud, get in

If you are in a position SHORT, and Tenkan crosses above the Kijun Line, get out.


Results of backtesting Ichimoku Cloud system on the 4 Majors 1 Lot, from 1970 to 2009:


Since the adage goes, cut your losses short and let your profits run, I added an Average True Range Filter.

So, for each increase (or decrease if short) of price by the 20 moving average of the AVERAGE TRUE RANGE, then buy a lot (up to 3).

Results of backtesting Ichimoku Cloud system on the 4 majors, with ATR and 3 lots:

[unhommefou]

The pair that performed the best was the USDJPY. So let's go a little more in depth into the 1 lot data:


Accumulated Profit:


and most importantly, MAXDRAWDOWN:

[unhommefou]

Not too bad, but lemme show you what happens with the three lot system:


Accumulated profit:


And MAXDRAWDOWN:




So, scaling into a position may give you a lot, but higher drawdowns are a beeyotch!!! (though you still made more overall than using just 1 lot).

The reason I took the system back to 1970 is to increase the sample size of the data, and to encompass a bear market, our bull market, and everything in between.

So, Mr. Ichimoku does have a nice trading edge. However, it does depend on the instrument that you trade (DO NOT USE THIS SYSTEM ON ANY PAIR WITH THE AUSSIE DOLLAR. EVERY AUD PAIR IS A MAJOR LOSER!)

BTW, to the Admins on this site, this whole 4 images per post only thing is 100% pure shenanigans if you are going to count smilies as images as well! ^_^

[p23ss]

Hi Unhommefou,
The standard setting is 9,26,52.
Can you try 5,10,20 (time frame D1) on you EA and compare the results?
I know an experienced trader on another forum uses 9,26,52 (D1) for general directions and 5,10,20 (D1) for signals.
Thank you.

[unhommefou]

I will try those new settings when I get a chance.

I have also played around a little more with the Ichimoku Cloud and have been able to decrease the drawdowns that this system experiences by adding something so simple that I am surprised that no one else has done it:

If the Tenkan Line is greater than the Kijun Line, and the current price is 1 * the Moving Average of the Average True Range (20) above the Cloud (Senkanspan b AND a), then get in. This way you avoid being whipsawed in and out.

I will test the newer settings that you have given me, as well as perform some walk forward testing on my discovery to see the results.

[dhannum]

You said:

To SELL:

Condition 1: Tenkan Sen below Kijun Sen.
Condition 2: Chikou Span below the Price Line.
Condition 3: Current Price below the Cloud.

To BUY:

Condition 1: Tenkan Sen above Kijun Sen.
Condition 2: Chikou Span above the Price Line.
Condition 3: Current Price above the Cloud.

As soon as ALL 3 conditions are satisfied, enter into the position at the open of next candle. Use 2 lots to enter the position.

------------------

Maybe I'm missing something. I don't understand how the Chikou line can help you with either entry or exit because it lags. How can we compare the Chikou span with the price line when the Chikou span isn't plotted on the current candles? I can see how it would help with backtesting, but you don't have that information when trading it real-time.

What am I missing?

Dan