Hopefully this will make you give the indicator the respect it deserves, I think once you realise the time and effort that went into the birth of this indicator and the dedication and time the creator put into it, it will give you a good foundation and start you with the correct mindset.
Ok are you sitting comfortably?
Good, then Ill begin.
Ichimoku – A History Lesson
Ichimoku Kinko Hyu is a purpose built trend trading chart system that can be used in every tradeable market, if price moves up and down and its tradable then ichimoku can be used to predict its movement in a very unique way.
Ichimoku uses a collection of indicators that work together to create a very visible system that enables the trader to see “at a glance” the low probability trade set ups, from those of higher probability.
Ichimoku means: one glance, Kinko means: equilibrium (or balance), and Hyo means: chart.
So loosely translated Ichimou Kinko Hyu means ‘One glance equilibrium chart’ or ‘Chart balance at a glance’
“Who came up with the idea for the ichimoku system”?
Ichimoku was developed by a Japanese journalist named Goichi Hosoda, to his friends he was also known as Ichimoku Sanjin, which can be translated as “What a man in the mountain sees”.
Goichi was an extremely talented yet quiet man, he spent most of his days locked away writing and reporting on the old rice trading markets, he understood how price moved and how it would react around certain areas of a chart, he soon discovered that price followed certain rules and the “reactions” were due to what we now know today as Support and Resistance.
Goichi’s aim was to create an “all in one” indicator that would help him view and analyse the charts in more detail but in less time.
This was of course going to be a huge and deeply complex task, but Goichi was dedicated to his work and started the process just before the Second World War.
Today if you were going to create a new groundbreaking indicator/charting method, you would have an endless supply of tech and information to draw from, the main piece of software being a highly accurate backtesting program built into the Metatrader platform. This lets you check back over years and years of price movements, and tweak and adjust in a matter of minutes to your hearts content.
However this was the 1940′s the first commercial computer hadn’t even been invented resources were tight…. but Goichi had an idea.
He hired a large group of students who spent over 20 years manually backtesting the different formulas.
lets just imagine that for a minute, 20 years of studying price movements and structure, just to create a method that may not even be any good or not even work at all……?!?
Truth is in 1969 Hosoda finally finished the ichimoku kinko hyu charting method and presented his book to the Japanese public, it rapidly became the most frequently used indicator in all the Japanese trading rooms.
Ichimoku shows you the whole story of the market, including trade direction, all the main support and resistance lines and if traded properly, you can find exact entry and exit points. It can also be used on all markets and all time frames
Even though ichimoku gained such wild popularity all across Asia, Ichimoku didn’t make an appearance in the western world till the 1990′s and even then because of the lack of translation and information, it was just seen as another weird charting method and most people just didn’t have the time or passion to try and learn this strange looking exotic indicator.
Only now, in the early 21st century are westerners understanding the true power of this indicator.
Hopefully i can share the knowledge I have learn about this indicator too and help you unlock the secret of this magical trading method.
Before I end this post I want to leave you with a small excerpt, to give you an idea of how Goichi Hosoda thinks and the passion he held for his charting method.
Hosoda strongly believed that the market was a direct reflection of human group dynamics or behaviour. He felt that human behaviour could be described in terms of a constant cyclical movement both away from and back towards equilibrium in their lives and interactions. Each of the five components that make up ichimoku provide its own reflection of this equilibrium or balance.
Thanks for listening