Hello I am a newbie from Leamington Ontario Canada and been studying baby pips and other technical analysis for several months. I am nearing retirement and wish to become a successful trader. I do not take this lightly and believe in educating myself in all trading aspects…technical analysis,fundamental and market sentiment as I believe these are all part of the big picture. I have recently taken an interest in the ichimoku kinko hyo trading system but I plan on opening a demo account in the new year and trying different trading strategies as laid out in Babypips to get a feel for what suits my as yet undecided style. Thanks for having me and I would appreciate any input from any forum members. (any comment on the ichimoku trading style?)
Hi and welcome to the forum.
Apologies in advance if I come across as pedantic (not my intention!) but [I]Ichimoku[/I] isn’t really a “trading [I]system[/I]”: it’s simply an indicator (an “indicator-set”, if you like).
If you’re going to be interested in indicators, in my opinion [I]Ichimoku[/I] is a very good one to be interested in. I have quite a bit of previous experience with it, and I know both institutional and independent traders who use it successfully.
For all that I think it’s a good indicator, I also think it can be a particularly difficult one to try to learn about, because there’s [I]so much[/I] misinformation about it online and in books, and I know it’s [I][U]really[/U][/I] difficult to find reliable information about it. In particular, several of the “forum threads” about Ichimoku which I’ve read both here and elsewhere have kind of made my hair stand on end. That’s the bad news. On a brighter note (possibly), if you have any specific questions about it, I’m very happy to try to answer them if I can, but I’m also quick to say “I don’t know” when I don’t know, and can’t guarantee to help you very much.
There’s a “Leamington” over here, too: it’s a beautiful old spa town in the midlands, with some lovely property.
Thank you lexys. Our Leamington is considered the tomato capital of Canada located at the southern most point in Canada a beautiful little town on Lake Eerie. I appreciate your candor on ichimoku I know this indicator is relatively new to western traders hence the lack of reliable information and probably not the best place to start my demo trading and as I mentioned in my post I will test other methods, however my studies so far on ichimoku have intrigued me the most. Have you found any reliable books you could recommend?
I haven’t, I’m afraid. There are a couple which I’ve seen recommended online, and I think they’re both awful. Also, the websites I’ve seen which purport to “teach” it often can’t spell the names of its component parts correctly (or even consistently, in many cases), and I’m afraid their level of understanding of how it works seems to match their literacy level and editing prowess. :o
I think the key concept to be aware of, when reading/learning about it, is that the “standard settings” (and/or approximations of them) widely recommended are based on [U]daily[/U] charts and [U]stock[/U]-trading specifically - and not only that, but they come from the time when there was a 6-day trading week and are calculated accordingly, so they just have [I]no[/I] relevance to forex-trading at all.
It’s only second-hand information (albeit from an excellent source) but I strongly suspect that the method of using Ichimoku described in this post might be pretty good, for intraday forex charts.
The [I]Tenkan Sen[/I] and [I]Kijun Sen[/I] lines - if it helps to appreciate what they’re doing and why - are exactly the same thing as what Western traders call “Donchian Channel midlines”, under another name. The standard of widely available stuff about Ichimoku is so bad that I’ve never even seen this rather significant and helpful reality mentioned or referred to on any website or in any book about the subject, and I can only assume that their authors somehow haven’t quite realised it. (Either that, or they haven’t thought it worth mentioning, but my money’s on the first reason).
Personally, I always found the [I]Kumo[/I] (“cloud”) the most useful part, if interpreted as a sort of “short-term measure of quite likely areas of support, resistance and unpredictability and an area where you might well [U]not[/U] want to enter a trade”.
The [I]Chikou Span[/I] I’ve always found absolutely useless, because all it represents is a price-line left-shifted by a fixed number of periods, and there’s no “deep mystery” about that at all. (Call me a skepchick but I learned gradually, over the years of playing about with Ichimoku, that if a “source” refers - as some do - to the [I]Chickou Span[/I] as “the soul of Ichimoku” or anything of the kind, that made me suspect that they probably have little idea what they’re talking about).
That said, I do think that with appropriate settings (which are both market-specific and time-frame specific) crossovers of the [I]Tenkan Sen[/I] and [I]Kijun Sen[/I] lines, [I]with the price on the appropriate side of the Kumo[/I], can be quite a good trade entry-indicator. And if you want suggestions, that’s the kind of way I’d suggest you try to use it. The principle is perhaps similar to “moving average crossovers when the price is above resistance or below support”, but arguably a bit better and more helpful, overall.
Subject to the [I]caveat[/I] I mentioned above, these threads may interest you …
[B]
http://forums.babypips.com/newbie-island/80639-bollinger-bands-vs-ichimoku-cloud.html
http://forums.babypips.com/free-forex-trading-systems/81862-good-trading-conditions.html
http://forums.babypips.com/newbie-island/75436-ichimoku-ea.html
Thank you lexys I appreciate your time and input on the matter as I back tested the ichimoku I found this to most accurate with the JPY pairs (duh) as I have learned most Japanese traders deal exclusively with this “method” my back testing included the tenkan-sen kijun-sen cross over above or below the cloud depending on the trend I also back tested an engulfing candle breaking the cloud with fairly consistent results.That being said my intentions are when I delve into demo trading I will certainly try MACD,stochastic,RSI,fibonacci along with trend lines channels sma,ema etc. etc.(Its hard to sleep at night lol) needless to say I’ll probably be demo trading until I find a comfort zone before I put any cash on the line! One other thing if I may indulge you,what is your take on switching to Heiken ashi candles to reduce noise during a trend to help find an exit point?
Hi there. I wish you all the luck in the world. Not the easiest way to get rich, but possible.
Many of the entry-methods I’ve seen in online discussions of Ichimoku seem to revolve around whether the crossover is above or below the cloud, but for what it’s worth the people I know successfully trading with Ichimoku-based entry methods are interested - when there’s a crossover - only in whether the [I][U]price[/U][/I] is above or below the cloud, not the crossover itself.
I’m interested that you should ask about this. I remember trying switching to HA candles (and to “smoothed HA candles”) after entry, myself, with a view to finding an exit-point. It seemed interesting to me. (I was using the close of the first colour-change candle with smoothed HA, and at one point tried the close of the second consecutive colour-change with “plain HA”). I don’t really know whether or not it works, I’m afraid, because I didn’t follow it through and didn’t back-test it properly. But I agree that it’s an interesting idea. I also used to experiment with reducing the time-frame slightly (e.g. from 15-minute to 10-minute bars) to help to determine an exit. Sorry, I don’t know the answer to this, if indeed there is a “generally correct” one. I now scale out of most trades, determing the initial exit(s) by volatility-related targets and the last by trailing a stop-loss manually above/below the most recently-formed swing-high/low, sometimes also on a slightly faster chart than the one from which I’ve entered.
Hi caomisa007 I am a realist and don’t expect miracles I know this is a tough job and I am studying the h### out of it lol I am hoping to start with a 55%-60% win ratio and continue growing with help from all you members on this forum. As I mentioned in an earlier post I am nearing retirement and like to keep my mind active (I am a 2070 rated chess player) so needless to say concentrating for hours isn’t an issue (ask my wife when she says your not even listening to me are you? ) and that’s why I find forex a new highly addictive challenge! Thank you for the welcome hope to hear from you. soon. Your friend Dave
You must be following Karjakin’s adventures against Carlsen, this week, then … what do you think of the show, so far, Dave?
I suspect that a specific win-ratio is an unusual initial aim for an aspiring trader: may I ask - out of curiosity - why that’s your approach/intention and how and why you alighted on the 55-60% figure as the objective? :33:
I still think Carlsen (2853) is king with no disrespect for Karjakin(2788) but playing the long trodden Ruy Lopez is definitely showing respect for each other as both players can play this opening with blindfolds on for 50+ moves I think the fireworks will start when we see a D4 or C4 opening. As for my approach to 55%-60% I am just trying to be realistic as depending on the spread I believe (correct me if I’m wrong) this is just over the break even point and I’m not expecting to come running out of the gate with a 75%-80% win rate. But all that aside what is your advice as an initial newbie objective?
I completely agree. (Karjakin blundered a bit, today, but still got out with a draw.)
Very unusual for both players in a World Championship final to be in their twenties.
Ah. I see (I think) … ok …
Break even point (and indeed whether a method makes overall profits or overall losses) isn’t determined by win-rates. There are systems with 80% win-rates that lose money consistently, and there are (some) systems with 25% win-rates that make pretty consistent profits.
What matters is [I]expectancy[/I], not win-rates.
What you say above would be perfectly true if the average profit on a winning trade were equal to the average loss on a losing trade, of course. But I’d advise you at least not to start off by [U]assuming[/U] that that’s necessarily going to be the best way to proceed.
You simply need to win more, collectively, on your winning trades than you lose, collectively, on your losing trades.
Quite a lot of trading textbooks explain (sometimes with examples) how and why it’s easier to make profits from systems with a win-rate around 30-50% than those with a win-rate around 50-70%. (It’s probably true, and it’s broadly speaking because lower win-rate systems tend to be those designed to catch the occasional “runner” at the expense of having far more “false starts”, so the profits are rarer but significantly bigger.)
That said, higher win-rates do undeniably have the advantage of smoother equity curves and position-sizing that’s easier to calculate appropriately, and when you’re starting out, both of those can be significant advantages.
I don’t want to try to talk you out of anything … but in principle I’d try to think in terms of [U]expectancy[/U] rather than win-rates.
Young is right,child prodigies for sure these guys could have beat me when they were 8 years old! lol Thanks for all your advice and communication lexys I have been watching alejobosteros posts with great interest and took note that he piqued your curiosity as well. I hope some more experienced traders will jump in and explore this technique.