Ichimoku Trading System

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:eek:

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:D

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

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!:frowning:

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

Thanks

Baby24

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:D], 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:

1 Like

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:

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

Accumulated profit:

And MAXDRAWDOWN:

:eek:

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! :slight_smile:

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.

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.

1 Like

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

Are you talking to me, or the OP of this post?

If you are talking about what I tested, I just used the Tenkan Line, Kijun Line, and the cloud in itself.

If the Tenkan is Greater than the Kijun line, and the price is greater than the cloud, get in.

Do the opposite for short entry.

Get out when the Tenkan crosses below the Kijun if Long, or crosses above the Kijun if short.

The OP of this thread uses the Chikou Span line.

hi i am very new to forex trading
i want ot open a demo account for practice to trading
can any one tell me some name of good demo account for practice.
is there any demo account available in babyPips.com
Regards
Manissi

Hi I am new too, have been trading demo a/c for the pass 4 weeks.

I open demo a/c with IBFX and MIG Investments, both using MT4 platform. Am testing the mobile version as well from MIGFX :slight_smile:

I believe other broker shd have demo a/c as well…

oanda.com should be your very first choice, because there you can later open a real account with 1 USD only and trade fractions of 1 USD or a bit more. Si you can start with little and build your account.

Baby24

if im not wrong, the chikou span line is used to see the direction the price is moving, or the trend. It shows current price relative to price in the past, ie 26 bars ago, to show whether the price has been moving up or down since then. If chikou span line is below the price line 26 bars ago, it shows tt there may be a downward trend, confirming ur short trade, n vice versa, Hope tt helps.

Okay,

So I tested the 5,10,20 Ichimoku settings and…ummm…here:

…and this is using 3 LOTS!!!

Indepth on USD/JPY

Indepth on EUR/USD

So the 5,10,20 settings do have a slight edge…although very slight.

You could ALMOST do better trading a 2x leverage ETF!

So far, the best settings are, without a shadow of a doubt are 9,26, 65

This comes from Walk Forward testing, all kinds of optimization on almost any pair I could get data on!

Have at it!

Unhommefon,

Appreciate your help to test the 5,10,20 setting.
And thanks for sharing.
Looking forward for more findings from you.

Thanks for the extensive testing!

Two questions:

  1. Did you use protective stops? You might place them at the cloud, or trailing a fixed # of pips, or you could use a moving stop based on the ATR. I don’t know what would work best.
  2. What exactly is the trigger to enter? The crossover or the moving outside the cloud? So, if a crossover happens in the cloud, do you wait until it breaks out, or do you ignore it and wait for the next cross. I interpret what you’ve written as that the crosses are what matters and the cloud is a confirmation, so if the cloud is in the wrong place, you ignore the signal. Am I right?

System entry was Tenkan line > Kijun line AND price above the cloud for long, and reverse these signals for short.

Unlike the original post, I did not use the Chosou Span.

The better system used an ATR(20) as a cloud filter, so if Price was > Cloud + ATR(20), then get in Long, and reverse for short. It prevented a LOT of whipsaws, but as with any whipsaw prevention system, it caused you to miss the beginning of major moves in the market.

Best settings were 9,26,65

Second best were 9, 26, 100

Third best was 9,26, 52.

Every other setting combination of Tenkan, Kijun, Cloud were nowhere near as good as these settings.

System also works on certain futures, however using this system on stocks proved problematic (this could be due to the fact that stocks REALLY do not trend very well).

I have one point to raise regarding optimization of Ichimoku settings.
I always prefer to use the traditional settings. Logic is simple, all the market is looking at Ichimoku with those settings and so, it has to be more accurate. Even the karge hedhe funds and institutional traders I know, talk about critical Ichimoku levels from the traditional settings.