# KittyMoku (Ichimoku Kinko Hyo) PART 1 (Basics)

Play this song while readin’ coz this is the background music (and this is how I see us KittyMoku traders - It’s us against the world!). Hihihi…

ICHIMOKU KINKO HYO

Hooman mode

*IMPORTANT NOTE: I will not discuss how the different aspects of the Ichimoku Kinko Hyo indicator are discussed. Babypips has its own discussion here How to Use Ichimoku Kinko Hyo in Forex - BabyPips.com and you can easily look up the computational formulas if you are interested. I am here to discuss practical application of the indicator for you to instantaneously apply best practices with it. Do note that I have lifted from various free and open online resources and explained them the way I understood and applied them so don’t be surprised if my discussion slightly deviates from what others may discuss.
P.S. I use Ichimoku Kinko Hyo in its DEFAULT settings. You can backtest and tweak as you see fit but for me, I feel itch purrfect as it is in the default settings. I don’t doubt the 30 years spent by Goichi Hosoda and his students testing the system.

Cat mode

Let the kitty lessons begin!

Foist, imma let you remember this simple diagram to guide your kitty purrspective

Tenkan Sen (TS) = Short term equilibrium
Kijun Sen (KS) = Medium term equilibrium
Senkou Span B (SSB) = Long term equilibrium

Da concept of EQUILIBRIUM is kinda like “where price SHOULD be”. This concept is unique and central to the Ichimoku Kinko Hyo and kittens must remember this by hawwt.

From there, you must remember these 2 schuper important schpesific scenarios:
1.) Pwice is AT or CLOSE TO equilibrium = NORMAL = Pwice moves as usual where trend tells it to move.
2.) Pwice is AWAY from equilibrium = ABNORMAL = Pwice needs to “cure” this “disequilibrium” (Keep this on your mind).

Keep this concept on your kitty head before we dissect the parts and systems we are ganna use.

Now pay attention, lezz analyze each kitty part:

Here is how a typical KittyMoku chart looks like:

A. TENKAN SEN - I usually color dis kibble RED. It shows (1) Short term support/resistance (2) Short term momentum. Take note: SHORT TERM

• Price is above Tenkan Sen = Bullish, Price is below Tenkan Sen = Bearish

• Tenkan Sen angled upwards = Bullish, Tenkan Sen angled downwards = Bearish, Tenkan Sen flat = Range

B. KIJUN SEN - I usually color dis kibble BWUE. It shows (1) Medium term support/resistance (2) Short term momentum (3) Medium term EQUILIBWIUM PWICE. Take note: MEDIUM TERM

• Price is above Kijun Sen = Bullish, Price is below Kijun Sen = Bearish

• Kijun Sen angled upwards = Bullish, Kijun Sen angled downwards = Bearish, Kijun Sen flat = DISEQUILIBRIUM (More on this later)

C. CHIKOU SPAN - I usually color this kibble ELLOW. Note that dis line is shifted back 26 pewwiods. It shows progression of trend (Current price action vs past price action)

• Chikou Span above price line = Bullish, Chikou Span below price line = Bearish = Chikou span on the price line = Range

D. SENKOU SPAN A - I usually color dis kibble with a tinge of GWEEN. Note that dis line is shifted forward 26 pewwiods.

• Acts as dynamic support or resistance but is best used with Senkou Span B forming the Kumo

E. SENKOU SPAN B - I usually color dis kibble with a tinge of RED. Note that dis line is shifted forward 26 pewwiods.

• SSB angled upwards = Bullish, SSB angled downwards = Bearish, SSB flat = DISEQUILIBRIUM (More on this later)

• Acts as dynamic support or resistance but is best used with Senkou Span A forming the Kumo

F. KUMO - Like cotton candy! I usually color bullish Kumo with GWEEN and beawwish Kumo with RED. The Kumo is simply the “space” between the Senkou Span A and the Senkou Span B.

• SSA above SSB = Bullish Kumo = Bullish sentiment, SSA below SSB = Bearish Kumo = Bearish sentiment

• “Current” Kumo acts as a reference for CURRENT SUPPORT or RESISTANCE. Current = Right on your kitty face! (The Kumo below the latest price)

• “Future” Kumo acts as a reference for POSSIBLE FUTURE SUPPORT or RESISTANCE.

Now that wee are familiar with the individual parts, lezz consolidate them and discuss SYSTEMS AND SIGNALS!
(We need to organize those parts so we don’t end up like a hot mess like dis kitty!

Managerbeaww’s note: The BASIC STRUCTURE for any system in the Ichimoku Kinko Hyo indicator is this: SIGNAL + CONFIRMATION(s) (Where confirmations are most often required!)
Signals with incomplete or no confirmations = weak signal. Yes you can make manni from weak signals but the point is, we play a game of PROBABILITIES. Confirmations INCREASE the probability that the signal is good and your chances of being profitable.
Think of it this way: Simple signals with no confirmations can give you a 50:50 chance to make money. Confirmations act as a filter, weeding out the bad trades, the fakeouts, the shakeouts, and low probability trades thereby IMPROVING YOUR ODDS of being profitable. This is why we wuv endorsing the system to newbies. It has a built in weenie protection system (for weenies like you! hihi…).

I. TENKAN SEN - KIJUN SEN CROSS - Dis is my kitty favowwite system!
Treat the Tenkan Sen and the Kijun Sen as Movin’ Averages with the Tenkan Sen bein’ the faster movin’ average and the Kijun Sen bein’ the slower movin’ average. Bullish crossovers below price are buy signals and bearish crossovers above price are sell signals rated as follows:

• Confirmation of signal (Dis is required! )
1. Crossover happens: Above Kumo = +1 Bullish point, Inside Kumo = 0, Below Kumo = +1 Bearish point

2. Chikou span is: Above price line = +1 Bullish point, In line with price line = 0, Below price line = +1 Bearish point
Kitty example!

Bullish crossover below price, crossover happens above Kumo so +1 Bullish point, Chikou span above price line so +1 Bullish point. Its a STRONG buy signal.

• Risk Management - Stoploss below Kijun Sen (1 or 2 Std Dev/ ATR away) [Or put a few whiskers below Kijun Sen]

• Trade Management - Exit the trade when: (Pick your poison) (1) TS-KS Crossover in the opposite direction / bearish crossover (2) Price breaks Kijun Sen (3) Price closes below Tenkan Sen

Note: TS-KS Cross is effective in most timeframes. I used this on 15m, 1H, 4H, D. As with ANY trading system, lower intraday timeframes can create “noise” and false/ choppy signals but dis kitty believes the confirmation systems of the KittyMoku system eliminates most noise and false signals.

II. KIJUN SEN BREAK - Dis is my 2nd favowwite system!
Treat the Kijun Sen as a strong support / strong resistance. When price breaks above the Kijun Sen and closes above it, it’s a buy signal. When price breaks below the Kijun Sen and closes below it, it’s a sell signal!

• Confirmation of signal (Dis is required! )
1. Breakout happens: Above Kumo = +1 Bullish point, Inside Kumo = 0, Below Kumo = +1 Bearish point

2. Chikou span is: Above price line = +1 Bullish point, In line with price line = 0, Below price line = +1 Bearish point

Kitty Example!

Price breaks out of the Kijun Sen, Breakout happens above Kumo so +1 Bullish point, Chikou span above price line so +1 Bullish point. Its a STRONG buy signal.

• Risk Management - Stoploss below Kijun Sen (1 or 2 Std Dev/ ATR away) [Or put a few whiskers below Kijun Sen]

• Trade Management - Exit the trade when: (1) Price breaks Kijun Sen (2) Price closes below Tenkan Sen (if you are a weenie!)

Note: KS Breakout is effective in most timeframes. I used this on 15m, 1H, 4H, D. As with ANY trading system, lower intraday timeframes can create “noise” and false/ choppy signals but dis kitty believes the confirmation systems of the KittyMoku system eliminates most noise and false signals.

III. KUMO BREAKOUT - Dis system works on the longer timeframes (Daily and possibly longer) (My kitty mentor said it was best on the WEEKLY but this cat has ADHD so weekly timeframe is a nyu for me)
Treat the Kumo as a major support or resistance. When price breaks above the Kumo, it’s a buy signal. When price breaks below the Kumo, it’s a sell signal.
P.S. Though Daily and above is recommended, I also made dis system work on the 4H before

Kitty example!

Price breaks out of the Kumo, buy and hold until price re-enters the Kumo. Vewwy pwaffitable but you gotta have nerves of steel to WAIT AND DO NOTHING for a long time.

• Confirmation of signal (Dis is required! ) Chikou span MUST BE ABOVE THE KUMO for buy tiggers and Chikou span MUST BE BELOW THE KUMO for sell triggers.

• Risk and trade management - Just the Kumo itself… buy on signal + confirmation, sell on the opposite signal. Nattin in between. That’s why you gotta have nerves of steel for this one!

IV. CHIKOU SPAN SIGNAL - Caveat: I have NEVER applied this system on its own
Buy signal is when Chikou Span breaks above the price line, sell signal is when Chikou Span breaks below the price line
Kitty example!

• Confirmation of signal (Dis is required! ) Price must be on the same bias vs Kumo compared to the Chikou span signal. If Chikou span breaks above the price line, price must also be above Kumo to confirm the bullish signal. If Chikou span breaks below the price line, price must also be below Kumo to confirm the bearish signal.
• Risk and trade management - (1) Opposite signal from the Chikou Span (2) Price enters Kumo
PS - Dis kitty advises you keep yourself from takin’ Chikou span breaks if Chikou span is still inside the Kumo. Wait for Chikou Span to break out of the Kumo too! Dis concept is called the “Kumo” shadow.

V. KUMO TWIST - Dis system was said to be moww effective on longer timeframes such as Daily and above but this kitty has quite a number of positive experience on usin’ dis system on da 1H and 4H timeframe.
Remember the 2 kitty lines that make up the Kumo? Senkou Span A and Senkou Span B. Treat those 2 kitty lines like movin’ averages with SSA as the faster movin’ average and SSB as the slower movin’ average. Trade their crossovers!
Kitty example!

• Confirmation of signal (Dis is required! ) Price must be on the same bias vs Kumo compared to the Kumo Twisk signal. If Kumo twist is bullish, price must also be above Kumo to confirm the bullish signal. If Kumo twist is bearish, price must also be below Kumo to confirm the bearish signal.
• Risk and trade management - (1) Opposite signal from Kumo Twist (2) Price enters Kumo
P.S. Tip for weenies: On a bullish Kumo, SSA is over SSB, on a bearish Kumo, SSB is over SSA.

OVERRIDING CONCEPT : EQUILIBRIUM
Do you still remember the concept of equilibrium we discussed earlier? Or did you chakk (fall asleep) during the lesson? (We call sleeping as chakking coz that’s the sound cats make when they doze off and snore )

Take all you know about the Ichimoku Kinko Hyo System and then smack dab in the middle, squeeze in the concept of EQUILIBRIUM over them all! Equilibrium is THE overriding principle that will possibly BEND all the rules you just learned.

When price is close or not too far from the Kijun Sen or the Senkou Span B, price is most likely IN EQUILIBRIUM and the rules are AS IS but when price has moves TOO FAR from either the Kijun Sen or the Senkou Span B, price is in DISEQUILIBRIUM

TLDR: Equilibrium = Normal, Disequilibrium = Special

DISEQUILIBRIUM - this is the Ichimoku System’s own version of a DIVERGENCE. Price is “DIVERGENT” from “WHERE IT SHOULD BE”.
Symptoms of disequilibrium can be seen in 2 aspects of the Ichimoku Kinko Hyo: (1) Kijun Sen FLATTENING (2) Senkou Span B Flattening

So what happens now? We need to CURE the disquilibrium. How? (1) Sharp correction of price towards the equilibrium to “re-establish” equilibrium (2) Consolidation so that the equilibrium will slowly adjust and “catch up”.

Knowing this, you must always watch out and filter your signals for the symptoms of disequilibrium. THIS CONCEPT CAN WORK AGAINST ANY ICHIMOKU SIGNALS AND INVALIDATE THEM. You must be kitty careful not to go against disequilibrium. It’s best that disequilibrium (if any) goes to work on your side of the team.

Case study:
XAGUSD - It’s early in the period of quarantine and dis kitty was lookin at commodities as a proxy for fear of economic collapse on the backdrop of an impending economic crisis from (1) US - China trade relations and (2) Covid-19

On the 1H chart, it looks like a TS-KS cross with +1 Bullish point for CS being above price and +1 Bullish point for the cross happening on top of the Kumo (which is also bullish). This is a STRONG BUY SIGNAL because of the confirmations agreeing with the signal. Kitty took the bait and I bit hard!

On the 4H chart, it looks like i took a “weak buy” signal coz the TS-KS cross happened under the Kumo and CS was still under the price line.
But then SSB told me that EQUILIBRIUM was at 14.2ish level and it was a pwetty lofty tawwget!
But as you zoom out, the big picture gets even better!

The D chart tells me equilibrium was actually at 15.1ish level!

My kitty gut tells me this is right for 2 reasons: (1) The higher timeframes are the boss [as with ANY system out there] and (2) Both the Kijun Sen and Senkou Span B agree on the EXACT price area so this is HIGH CONVICTION

This is my experience of having DISEQUILIBRIUM ON MY SIDE. Itch pawesome!

So I set my target a few whiskers below that level (for conservativism) and let my positions ride the trend.
The rest is history.

Good luck out there, kitty traders! I hope this helps you! Thank you for reading!

12 Likes

Very good for all the newbies out there.

Can’t beat Ichimoku.

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Must have taken many hours to write that post Cat?
Thank you

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Thank you, pawesome hooman!

They are my mission! We’ll help all we can to put those kittens into shape!

All worth it as long as it helps my fellow traders!

You are welcome! I shall strive to write more helpful stuff for the kitty traders out there!

While the topic is my favourite strategy, I switched off whenever the kitty kitty language was constantly used. For kitty’s sake, treat it seriously, please.

Otherwise, a good presentation. Thank you.

2 Likes

Where’s the fun in that?
You are welcome and thank you for readin’! Cheers to more traders usin’ dis system!

Thank you, I was a fan of Ichi but the concept of equilibrium / disequilibrium is entirely new to me. I am still not absolutely clear on how you read the equilibrium level or when it cancels the signal rules. Can’t wait for part 2!

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Oh yes, it’s one of the concepts rarely discussed out there! But the concept of equilibrium is actually a central concept in Ichimoku as the name itself states: “one glance equilibrium chart”. Think of equilibrium as an additional filter for your signals. It’s best if the location of equilibrium price (if there is disequilibrium) is in the direction of your target.
I am glad this has helped you! Kitty feels fulfilled!

Yes ill discuss more on some specific setups and perhaps more on disequilibrium when I do part 2. Stay pawesome n good luck!

2 Likes

One question if I may: looking for tell tale symptoms of disequilibrium, no prob with KS but for SSB… do you look for flattening at the present date/time or at its position 26 periods ahead?

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Very good question. This can be confusing for some because of the 26 period shifting that is unique to Ichimoku. Is the flat SSB relevant on the “current” Kumo or is it relevant on the “future” Kumo? The answer is… drumroll Future Kumo!
The SSB on the “future” Kumo is STRONGER and more relevant because it is MORE RECENT and is a result of current prices. The “current” Kumo is a result of past prices and its “pull” already happened in the past.

Notice how Kumo 1 pulled down price but as price was being pulled down, Kumo 2 flattened (on a price level higher than Kumo 1) which prevented a further move down by attracting price to a level higher than Kumo 1. Kumo 1’s pull was never fully satisfied (Kumo 1 lost its “pull” when 2 started pulling) and Kumo 3 is when the pulling stopped. The chart shows us that price is currently above Kumo 1 but Kumo 1 has lost its “pull” in the past already.
hth.

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You bet it helps. Here’s a puwwing kitty. You are right, this concept is not much talked about at least for what I have found but it does make sense.
I like how you talk of this as an equilibrium pull, like gravity on the pendulum. Definitely paper testing this from now on.

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Don’t you worry your kitty head on this. It’s the system’s fault. No one discusses equilibrium that much in public despite it being a central concept to Ichimoku.
Alright! Good luck! I’ll work on this concept more on my next post as I’ll also consolidate other setups and concepts. Till then, stay pawesome!

Thank you so much cat i was looking for info/pdf about using this

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You are kitty welcome! I am happy and fulfilled to have helped you on your journey. Good luck!

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thank you so much for your sharing. The 5 lines indeed is very good once fully understood.
The angle of Kijun sen & SSA/SSB are important as well.
Ur title mentioned this is part 1 basic. looking forward to your part 2 & also the advance strategies…

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Truth! It’s an indication of near-term, medium-term, and long-term momentum!

You are welcome and I am happy to help!

I am happy to share more soon! This kitty will start working on sharing setups and other related concepts soonest! Till then, I wish u well and take kitty care!

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Thank you very much for this. Very helpful. Easy to understand. Looking forward for the part-2

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Pawesome! Dis kitty is happy to help! Till then, I wish you well on ur tradin’!

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Thanks for this amazing post !
However i still have problem with your favowwite system : TENKAN SEN - KIJUN SEN CROSS**
you said Chikou span is: Above price line = +1 Bullish point
… but i dont see that in your case study

The Chikou span is the closing price 26 periods backwards so your rule only applies if you are 1 candle after the crossover of the tenkan/kinju sen and the price is above the last close ? Am i right or totally lost ?

Cant wait for the part 2 !

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