Ichimoku Kinko Hyo Is an Integrated Trading System
Ichimoku is an integrated trading system where all the five component indicator lines have to work in concert with each other to produce an overall Ichimoku snapshot of a trading opportunity. Every strategy using the Ichimoku model must take the system as a whole rather than using each component in isolation. This is the mistake made by people trying to automate their Ichimoku trading system. They isolate each component part and in the process, they get mixed results in the long run.
What the Ichimoku is trying to capture is a snapshot of the underlying market sentiment prevailing in a particular trading session. What the trader needs to do is to develop his ability to recognize these sentiments as they take shape and unfold before his eyes through the use of the Ichimoku charts.
Itchimoku is actually built on the original concept upon which the Japanese candlestick charts was created. It stems from the need to know the underlying sentiment of the traders and trade along with them rather than against them. The candlestick charts attempt to portray an accurate picture of where the majority of the traders wish to take the prices. Ichimoku fine tunes this task through the use of 5 different indicator lines meticulously studied and put together by Hosoda and his bunch of student volunteers. The result is an integrated analytical tool that gives you the big picture of the market at a glance. Whereas the candlestick requires you to strain a bit and tap your memory for a particular chart pattern, the addition of the Ichimoku lines as chart overlays gives you an instant grasp of what the market wants to do.
The Ichimoku indicator has become a standard tool built-in to various trading platforms particularly with the popular Meta Trader platform where its default settings are 9, 26, and 52. The trading platform allows users to customize the settings according to his own requirement and trading strategy. The important thing is to back test new settings before incorporating them to your trading strategy. You must remember that the default settings work well with daily and weekly charts. For day trading purposes where you will be using hourly, half hourly charts, and minute charts, you will have to experiment with different settings to be able to come up with the best setting giving the most optimal result on back testing.
Do not forget that it is an integrated system and any trading decision you make must be a product of not just one or two of the Ichimoku components but all five indicators. Never trade based on an incomplete picture which means each one of the Ichimoku components is leading you to the same trading decision. But do not also forget that the Ichimoku indicator works best in highly trending markets but will produce false signals which often results in whip saw losses in sideways moving markets. That is why, it is best to use it with other indicators, especially those that indicate whether a market is trending or not. This means you also must be ready to discard it in favor of another analytical tool once the market goes flat.
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