Various - Articles & Tutorials As Introduction To Ichimoku Trading

ICHIMOKU 101
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results.
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Table of Contents
Table of Contents .............................................................................................................................................................. 3
Quick Description ............................................................................................................................................................. 4
History............................................................................................................................................................................... 4
Equilibrium at a Glance .................................................................................................................................................... 4
Ichimoku Components ...................................................................................................................................................... 5
Ichimoku Settings ............................................................................................................................................................. 6
Tenkan Sen.....................................................................................................................................................................7
Kijun Sen .......................................................................................................................................................................8
Chikou Span .................................................................................................................................................................10
Senkou Span B .............................................................................................................................................................12
The Kumo Cloud..........................................................................................................................................................13
The basics............................................................................................................................................................13
A Better Measure of Support and Resistance .....................................................................................................13
Price's Relationship to the Kumo ........................................................................................................................14
Kumo Depth ........................................................................................................................................................14
Kumo depth or thickness is a function of price volatility ...................................................................................15
Kumo Sentiment .................................................................................................................................................15
Flat Top/Bottom Kumos .....................................................................................................................................16
Trend trading................................................................................................................................................................... 17
Ichimoku Kinko Hyo and Trend Trading........................................................................................................................ 17
Ichimoku Strategies ........................................................................................................................................................ 18
Tenkan Sen/Kijun Sen Cross .......................................................................................................................................18
Kijun Sen Cross ...........................................................................................................................................................21
Kumo Breakout ............................................................................................................................................................24
Senkou Span Cross ......................................................................................................................................................26
Chikou Span Cross .......................................................................................................................................................29
Other Resources .............................................................................................................................................................. 32
Websites: ......................................................................................................................................................................32
Books: ..........................................................................................................................................................................32
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Quick Description
Ichimoku Kinko Hyo is a purpose-built trend trading charting system that has been successfully used in nearly every
tradable market. It is unique in many ways, but its primary strength is its use of multiple data points to give the trader
a deeper, more comprehensive view into price action. This deeper view, and the fact that Ichimoku is a very visual
system, enables the trader to quickly discern and filter "at a glance" the low-probability trading setups from those of
higher probability.
History
The charting system of Ichimoku Kinko Hyo was developed by a Japanese newspaper man named Goichi Hosoda. He
began developing this system before World War II with the help of numerous students that he hired to run through the
optimum formulas and scenarios - analogous to how we would use computer simulated back testing today to test a
trading system. The system itself was finally released to the public in 1968, after more than twenty years of testing,
when Mr. Hosoda published his book which included the final version of the system.
Ichimoku Kinko Hyo has been used extensively in Asian trading rooms since Hosoda published his book and has been
used successfully to trade currencies, commodities, futures, and stocks. Even with such wild popularity in Asia,
Ichimoku did not make its appearance in the West until the 1990s and then, due to the utter lack of information in
English on how to use it, it was mostly relegated to the category of another "exotic" indicator by the general trading
public. Only now, in the early 21st century, are western traders really beginning to understand the power of this
charting system.
Equilibrium at a Glance
The name Ichimoku Kinko Hyo, which translates to "Equilibrium chart at a glance" aptly, describes the system and
how it is to be used, as described below:
While Ichimoku utilizes five separate lines or components, they are not to be used individually, in isolation, when
making trading decisions, but rather used together to form an integrated "whole" picture of price action that can be
gleaned "at a glance". Thus, a simple look at an Ichimoku chart should provide the Ichimoku practitioner with a nearly
immediate understanding of sentiment, momentum and strength of trend.
Price action is constantly measured or gauged from the perspective of whether it is in relative equilibrium or
disequilibrium. Hosada strongly believed that the market was a direct reflection of human group dynamics or
behavior. He felt that human behavior 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.
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Ichimoku Components
The Ichimoku chart is composed of five separate indicator lines. These lines work together to form the complete
"Ichimoku picture". A summary of how each line is calculated is outlined below:
Japanese Name
TENKAN SEN
KIJUN SEN
English Name
turning line
standard line
Formula
(HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods
CHIKOU SPAN
lagging line
SENKOU SPAN A
1st leading line
CURRENT CLOSING PRICE time-shifted backwards (into the past) 26

periods
(TENKAN SEN + KIJUN SEN)/2 time-shifted forwards (into the future)
26 periods
SENKOU SPAN B
2nd leading line
(HIGHEST HIGH + LOWEST LOW)/2 for the past 52 periods timeshifted forwards (into the future) 26 periods
The Senkou span A and B deserve special mention here as they, together, form the Ichimoku kumo or cloud. We
cover the kumo and its myriad functions in more detail in the kumo section.
The chart below (FIGURE 1) provides a visual representation of each of these five components:
FIGURE 1 - Ichimoku Components
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Ichimoku Settings
As you can see in the Ichimoku Components section above, each line calculation has one and sometimes two different
settings based on the number of periods considered. After much research and back testing, Goichi Hosoda finally
determined that the settings of 9, 26 and 52 were the ideal settings for obtaining optimum results with Ichimoku. He
derived the number 26 from what was then the standard Japanese business month (which included Saturdays). The
number 9 represents a week and a half and the number 52 represents two months.
The standard settings for an Ichimoku Kinko Hyo chart are 9, 26, 52.
There is some debate around whether or not these settings of 9, 26, 52 are still valid given that the standard work
month in the West does not include Saturdays. In addition, in non-centralized markets that do not keep standard
business hours like the Forex (which trades around the clock), some have posited that there may be more appropriate
settings. Nevertheless, EII Capital, as well as most other professional Ichimoku traders, agree that the standard settings
of 9, 26, 52 work extremely well and do not need to be altered.
The argument could be made that, since Ichimoku Kinko Hyo functions as a finely-tuned, integrated whole, changing
the settings to something other than the standard could throw the system out of balance and introduce invalid signals.
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Tenkan Sen
The Tenkan Sen, as mentioned, is calculated in the following manner:
While many may compare the tenkan sen to a 9 period simple moving average (SMA), it is quite different in the sense
that it measures the average of price's highest high and lowest low for the last 9 periods. Hosoda believed that using
the average of price extremes over a given period of time was a better measure of equilibrium than merely using an
average of the closing price. This study of the tenkan sen will provide us with our first foray into the key aspect of
equilibrium that is so prevalent in the Ichimoku Kinko Hyo charting system.
Consider the chart in Figure 1 below:
FIGURE 1 - Tenkan Sen vs. 9 Period SMA

As can be seen in the chart, the tenkan sen often exhibits "flattening" whereas the 9 period SMA does not. This is due
to the fact that the tenkan sen uses the average of the highest high and lowest low rather than an average of the closing
price. Thus, during periods of price ranging, the tenkan sen will clearly show the midpoint of the range via its flat
aspect.
When the tenkan sen is flat, it essentially indicates a trendless condition over the last 9 periods.
It can also be seen how the tenkan sen provides a much more accurate level of price support than does the 9 period
SMA. With only one exception, price action stayed above the tenkan sen in the three highlighted areas of the chart,
while price broke below the SMA numerous times. This is due to the more conservative manner in which the tenkan
sen is calculated, which makes it less reactive to small movements in price. On a bearish chart, the tenkan sen will
likewise act as a level of resistance.
The angle of the tenkan sen can also give us an idea of the relative momentum of price movements over the last 9
periods. A steeply angled tenkan sen will indicate a nearly vertical price rise over a short period of time or strong
momentum, whereas a flatter tenkan sen will indicate lower momentum or no momentum over that same time period.
The tenkan sen and the kijun sen both measure the shorter-term trend. Of the two, the tenkan sen is the "fastest" given
that it measures trend over the past 9 periods as opposed to the kijun sen's 26 periods. Thus, given the very short term
nature of the tenkan sen, it is not as reliable an indicator of trend as many other components of Ichimoku.
Nevertheless, price breaching the tenkan sen can give an early indication of a trend change, though, like all Ichimoku
signals, this should be confirmed by the other Ichimoku components before making any trading decision.
One of the primary uses of the tenkan sen is its relation to the kijun sen. If the tenkan sen is above the kijun sen, then
that is a bullish signal. Likewise, if the tenkan sen is below the kijun sen, then that is bearish. The crossover of these
two lines is actually a trading signal on its own, a topic that is covered in more detail in the Ichimoku Trading
Strategies section.
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Kijun Sen
The kijun sen is calculated in the following manner:
The kijun sen is one of the true "workhorses" of Ichimoku Kinko Hyo and it has myriad applications. Like its brother,
the tenkan sen, the kijun sen measures the average of price's highest high and lowest low, though it does so over a
longer time frame of 26 periods as opposed to the tenkan sen's 9 periods. The kijun sen thus provides us with all the
information the tenkan sen does, just on a longer time frame.
Due to the longer time period it measures, the kijun sen is a more reliable indicator of short-term price sentiment,
strength and equilibrium than the tenkan sen. If price has been ranging, then the kijun sen will reflect the vertical
midpoint of that range (price equilibrium) via its flat aspect. Once price exceeds either the last highest high or lowest
low within the last 26 periods, however, the kijun sen will reflect that by either angling up or down, respectively.
Thus, short-term trend can be measured by the direction of the kijun sen. In addition, the relative angle of the kijun sen
will indicate the strength or momentum of the trend.
Price equilibrium is expressed even more accurately in the kijun sen than in the tenkan sen, given the longer period of
time it considers. Thus, the kijun sen can be relied upon as a significant level of price support and resistance (see
highlighted areas in Figure II below).
FIGURE II - Kijun Sen Support

Price tends to move alternately away from and back toward the kijun sen in a cyclical fashion due to the kijun sen's
strong expression of equilibrium or stasis. Thus, when price momentum is extreme and price moves rapidly up or
down over a short period of time, a certain "rubber band" effect can be observed on price by the kijun sen, attracting
price back towards itself and bringing it back to equilibrium. An analogy could be made between how price interacts
with the kijun sen and how electricity always seeks to return to ground or zero potential. The "ground" in this case is
the kijun sen and price will always seek to return to that level. This phenomenon is particularly evident when the kijun
sen is flat or trendless, as can be seen in Figure III below:
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FIGURE III - Kijun Sen "Rubber Band" Effect
Given the dynamics of the kijun sen outlined above, traders can use the kijun sen effectively as both a low-risk point
of entry as well as a solid stop loss. These two tactics are employed extensively in both the kijun sen cross as well as
the tenkan sen/kijun sen cross strategies which are covered in greater detail in our Ichimoku Trading Strategies
section.
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Chikou Span
The chikou span is calculated in the following manner:
CURRENT CLOSING PRICE time-shifted backwards (into the past) 26 periods
The chikou span represents one of Ichimoku most unique features; that of time-shifting certain lines backwards or
forwards in order to gain a clearer perspective of price action. In the chikou span's case, the current closing price is
time-shifted backwards by 26 periods. While the rationale behind this may at first appear confusing, it becomes very
clear once we consider that it allows us to quickly see how today's price action compares to the price action of 26
periods ago, which can help determine trend direction.
If the current close price (as depicted by the chikou span) is lower than the price of 26 periods ago, that would indicate
that there is a potential for more bearish price action to come, since price tends to follow trends. Conversely, if the
current closing price is above the price of 26 periods ago, that would then indicate the possibility for more bullish
price action to follow.
Consider the charts in Figures IV and V below:
FIGURE IV - Chikou Span in Bullish Configuration
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FIGURE V - Chikou Span in Bearish Configuration
In addition to providing us with another piece of the "trend puzzle", the chikou span also provides clear levels of
support and resistance, given that it represents prior closing prices. Ichimoku practitioners can thus draw horizontal
lines across the points created by the chikou span to see these key levels and utilize them in their analysis and trading
decisions (see Figure VI below).
FIGURE VI - Chikou Span Support and Resistance Levels

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Senkou Span A
The Senkou span A is calculated in the following manner:
(TENKAN SEN + KIJUN SEN)/2 time-shifted forwards (into the future) 26 periods
The Senkou span A is best-known for its part, along with the Senkou span B line, in forming the kumo, or "Ichimoku
cloud" that is the foundation of the Ichimoku Kinko Hyo charting system. The Senkou span A is another one of the
time-shifted lines that are unique to Ichimoku. In this case, it is shifted forwards by 26 periods. Since it represents the
average of the tenkan sen and kijun sen, the Senkou span A is itself a measure of equilibrium. Goichi Hosoda knew
well that price tends to respect prior support and resistance levels, so by time-shifting this line forward by 26 periods
he allowed the Ichimoku practitioner to quickly see "at a glance" where support and resistance from 26 periods ago
reside compared with current price action.
Senkou Span B
The Senkou span B is calculated in the following manner:
(HIGHEST HIGH + LOWEST LOW)/2 for 52 periods time-shifted forwards (into the future) 26 periods
The Senkou span B is best-known for its part, along with the Senkou span A line, in forming the kumo, or "Ichimoku
cloud" that is the foundation of the Ichimoku Kinko Hyo charting system. On its own, the Senkou span B line
represents the longest-term view of equilibrium in the Ichimoku Kinko Hyo system. Rather than considering only the
last 26 periods in its calculation like the Senkou span A, the Senkou span B measures the average of the highest high
and lowest low for the past 52 periods. It then takes that measure and time-shifts it forward by 26 periods, just like the
Senkou span A. This convention allows Ichimoku practitioners to see this longer term measure of equilibrium ahead
of current price action, allowing them to make informed trading decisions.
While it is possible to trade off of the Senkou span A and B lines on their own, their real power comes in their
combined dynamics in the kumo.
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The Kumo Cloud

The basics
The kumo is the very "heart and soul" of the Ichimoku Kinko Hyo charting system. Perhaps the most immediately
visible component of Ichimoku, the kumo ("cloud" in Japanese) enables one to immediately distinguish the prevailing
"big picture" trend and price's relationship to that trend. The kumo is also one of the most unique aspects of Ichimoku
Kinko Hyo as it provides a deep, multi-dimensional view of support and resistance as opposed to just a single, unidimensional level as provided by other charting systems. This more encompassing view better represents the way in
which the market truly functions, where support and resistance is not merely a single point on a chart, but rather areas
that expand and contract depending upon market dynamics.
The kumo itself is comprised of two lines, the Senkou span A and the Senkou span B. Each of these two lines provides
their own measure of equilibrium and together they form the complete view of longer-term support and resistance.
Between these two lines lies the kumo "cloud" itself, which is essentially a space of "no trend" where price
equilibrium can make price action unpredictable and volatile.
Trading within the kumo is not a recommended practice, as its trendless nature creates a high degree of uncertainty.
A Better Measure of Support and Resistance
As mentioned earlier, one of the kumo's most unique aspects is its ability to provide a more reliable view of support
and resistance than that provided by other charting systems. Rather than providing a single level for S&R, the kumo
expands and contracts with historical price action to give a multi-dimensional view of support and resistance. At times
the kumo's ability to forecast support and resistance is nothing short of eerie, as can be seen in the chart below (Figure
I) for USD/CAD, where price respected the kumo boundaries on five separate occasions over a 30-day span.
FIGURE I - Kumo Support & Resistance

The power of the kumo becomes even more evident when compared with traditional support and resistance theories.
In the chart for Figure II below, we have added a traditional down trend line (A) and a traditional resistance line at
1.1867 (B). Price managed to break and close above both the down trend line and the single resistance level at point C.
Traditional S&R traders would take this as a strong signal to go Long this pair at that point. A savvy Ichimoku
practitioner, on the other hand, would take one look at price's location just below the bottom edge of the kumo and
would know that going long at that point is extremely risky given the strong resistance presented by the kumo. Indeed,
price did bounce off of the kumo and dropped approximately 250 pips, which would have most likely eradicated the
long position of the traditional S&R trader.
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Frustrated by his last losing trade, the traditional S&R trader spots another chance to go long, as he sees price break
and close above the prior swing high at point D. The Ichimoku trader only sees price trading in the middle of the
kumo, which he knows is a trendless area that makes for uncertain conditions. The Ichimoku trader is also aware that
the top boundary of the kumo, the Senkou span B, is close at hand and may present considerable resistance, so he
again leaves this dubious long trade to the traditional S&R trader as he awaits a better trade opportunity. Lo and
behold, after meeting the kumo boundary and making a meager 50 pips, the pair drops like a stone nearly 500 pips.
The example given above illustrates how Ichimoku multi-dimensional view of support and resistance gives the
Ichimoku practitioner an "inside view" of S&R that traditional chartists do not have. This enables the Ichimoku
practitioner to select only the most legitimate, high reward trade opportunities and reject those of dubious quality and
reward. The traditional chartist is left to "hope" that their latest breakout trade doesn't turn into a head fake - a shaky
strategy, at best.
FIGURE II - Traditional S&R Theory vs. Ichimoku Kumo
Price's Relationship to the Kumo

In its most basic interpretation, when price is trading above the kumo, that is a bullish signal since it indicates current
price is higher than the historical average. Likewise, if price is trading below the kumo that indicates that bearish
sentiment is stronger. If price is trading within the kumo that indicates a loss of trend since the space between the
kumo boundaries is the ultimate expression of equilibrium or stasis. The informed Ichimoku practitioner wills
normally first consult price's relationship to the kumo in order to get their initial view on a chart's sentiment. From a
trading perspective, the Ichimoku chartist will also always wait for price to situate itself on the correct side of the
kumo (above for long trades and below for short trades) on their chosen execution time frame before initiating any
trades. If price is trading within the kumo, then they will wait to make any trades until it closes above/below the kumo.
Kumo Depth
As you will see upon studying an Ichimoku chart, the kumo's depth or thickness can vary drastically. The depth of the
kumo is an indication of market volatility, with a thicker kumo indicating higher historical volatility and a thinner one
indicating lower volatility. To understand this phenomenon, we need to keep in mind what the two lines that make up
the kumo, the Senkou span A and the Senkou span B, represent. The Senkou span A measures the average of the
tenkan sen and kijun sen, so its "period" is between 9 and 26 periods, since those are the two periods that the Tenkan
Sen and Kijun Sen measure, respectively. The Senkou span B line, on the other hand, measures the average of the
highest high and lowest low price for the past 52 periods. Thus, the Senkou Span A is essentially the "faster" line of
the two, since it measures a shorter period of equilibrium.
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Consider the chart in Figure III below. For the previous 52 periods, price made a total range of 793 pips (from a high
of 1.2672 to a low of 1.1879) The midpoint or average of this range is 1.2275 and that is thus the value of the Senkou
span B. This value is then time-shifted forwards by 26 periods so that it stays in front of current price action. The
Senkou span A is more reactive to short-term price action and thus is already reflecting the move of price back up
from its low of 1.1879 in its positive angle and the gradually thinning kumo. The Senkou span B, on the other hand, is
actually continuing to move down as the highest high of the last 52 periods continues to lower as it follows the price
curve's move down from the original high of 1.2672. If price continues to rise, the Senkou span A and B will switch
places and the Senkou span A will cross above the Senkou span B in a so-called "kumo twist".
FIGURE III - The Kumo and its Calculations

The kumo expands and contracts based on market volatility. With greater volatility (i.e. where the price of a given
currency pair changes direction dramatically over a short period of time), the faster Senkou span A will travel along in
relative uniformity with the price curve while the slower Senkou span B will lag significantly given that it represents
the average of the highest high and lowest low over the past 52 periods. Thicker kumos are thus created when
volatility increases and thinner ones are created when volatility decreases.
Kumo depth or thickness is a function of price volatility
From a trading perspective, the thicker the kumo, the greater support/resistance it will provide. This information can
be used by the Ichimoku practitioner to fine tune their risk management and trading strategy. For example, they may
consider increasing their position size if their Long entry is just above a particularly thick kumo, as the chances of
price breaking back below the kumo is significantly less than if the kumo were very thin. In addition, if they are
already in a position and price is approaching a very well-developed kumo on another time frame, they may choose to
either take profit at the kumo boundary or at least reduce their position size to account for the risk associated with the
thicker kumo.
In general, the thicker and more well-developed a kumo is, the greater the support/resistance it will provide.
Kumo Sentiment
In addition to providing a view of sentiment its relationship with price, the kumo itself also has its own "internal"
sentiment or bias. This makes sense when we consider that the kumo is made up of essentially two moving averages,
the Senkou span A and the Senkou span B. When the Senkou span A is above the Senkou span B, the sentiment is
bullish since the faster moving average is trading above the slower. Conversely, when the Senkou span B is above the
Senkou span A, the sentiment is bearish.
This concept of kumo sentiment can be seen in Figure IV below:
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FIGURE IV - Kumo Sentiment

When the Senkou span A and B switch places, this indicates an overall trend change from this longer-term
perspective. Ichimoku practitioners thus keep an eye on the leading kumo's sentiment for clues about both current
trend as well as any upcoming trend changes. The "Senkou span cross" is an actual trading strategy that utilizes this
kumo twist as both an entry as well as a continuation or confirmation signal. More on this strategy is covered in our
Ichimoku Trading Strategies section.
Flat Top/Bottom Kumos
The flat top or bottom that is often observed in the kumo is key to understanding one piece of the kumo's "equilibrium
equation". Just like the "rubber band effect" that a flat kijun sen can exert on price, a flat Senkou span B can act in the
same way, attracting price that is in close proximity. The reason for this is simple: a flat Senkou span B represents the
midpoint of a trendless price situation over the prior 52 periods - price equilibrium. Since price always seeks to return
to equilibrium, and the flat Senkou span B is such a strong expression of this equilibrium, it becomes an equally strong
attractor of price.
In a bullish trend, this flat Senkou span B will result in a flat bottom kumo and in a bearish trend it will manifest as a
flat top kumo. The Ichimoku practitioner can use this knowledge of the physics of the flat Senkou span B in order to
be more cautious about both their exits out of the kumo. For instance, when exiting a flat bottom (bullish) kumo from
the bottom, rather than merely placing an entry order 10 pips below the Senkou span B, savvy Ichimoku practitioners
will look for another point around which to build their entry order to ensure they don't get caught in the flat bottom's
"gravitational pull". This method minimizes the number of false breakouts experienced by the trader.
See the highlighted areas in the chart for Figure V below for an example of flat top and bottom kumos:
FIGURE V - Flat Top and Flat Bottom Kumos

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Trend trading
"Trend following is an investment strategy that takes advantage of long-term moves that play out in various markets...
Traders who use this approach can use current market price calculation, moving averages and channel breakouts to
determine the general direction of the market and to generate trade signals. This approach is reactive, diversified,
long-term, and systematic by nature. Traders who subscribe to a trend following strategy do not aim to forecast or
predict markets or price levels; they simply jump on the trend and ride it."
Ichimoku Kinko Hyo and Trend Trading

It must be understood by any who wishes to use the power of Ichimoku Kinko Hyo that it is, first and foremost, a
trend trading system. It is further assumed that the trader wielding Ichimoku does so with a solid undertanding of the
basic tenets of trend trading. This is a key assumption, since knowledge of how to trade the trend is absolutely critical
to long-term success with Ichimoku. Ichimoku on its own will not teach one the underlying philosophy of trend
following, so we must make a special mental note at this point regarding the key factors involved in successful trend
trading.
Trend traders:
o
o
o
o
o
o
o
o
o
NEVER attempt to predict where the market will go

NEVER attempt to pick "tops" and "bottoms" of price action
ALWAYS respect the trend and align their trades accordingly
Let the market tell them when the trend is finished, not their "intuition"
Realize that they will necessarily sacrifice some pips at the beginning and end of a trend as
they wait for confirmation that the trend beginning and end are authentic
Look at price action from a long-term perspective and don't get shaken by volatility
Understand that they will go through some potentially significant but temporary periods of
drawdown as the trend matures
Understand that trend trading can lead to large gains but also equally large losses
Understand that trends can take place on multiple time frames
Profitable trend trading is 99% mental. If one can conquer their mind and quell the inevitable inner dialogue that
screams "Whoa! Looks like price is going against your position! The trend must be ending - SELL NOW!!" and keep
their eyes on the long term, they stand an excellent chance at being a successful, happy and stress-free trend trader.
However, if they cannot turn off this inner dialogue or at least ignore it and keep their focus on the long-term, then
they are in for a very short, very bumpy ride as a Forex trader.
As a charting system that is purpose-built for trend trading, Ichimoku Kinko Hyo can provide the savvy practitioner
with a much deeper view of the trend and therefore, more secure entry and exit signals than any other trend trading
system available. Nevertheless, it must be combined with the proper mindset in order to be used to its full potential.
NOTE: We talk only about trending trading in this E-Book. However, you can easily use the strategies for
Counter trend trading with multiple timeframes.
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Ichimoku Strategies
READ THIS FIRST!
Ichimoku is a finely-tuned, integrated charting system where the five lines all work in concert to produce the end
result. We emphasize the word "system" here because it is absolutely key to understanding how to use the various
trading strategies we outline in this section. Every strategy covered below is to be used and measured against the
prevailing Ichimoku "picture" rather than in isolation. This means that, while a scenario that matches a given strategy
may have transpired, you still must weigh that signal against the rest of the chart in order to determine whether or not
it offers a high-probability trade. Another way of looking at it is that Ichimoku is a system and the discrete strategies
for trading it are merely "sub-systems" within that larger system. Thus, looking at trading any of these strategies from
an automated or isolated approach that doesn't take into account the rest of what the Ichimoku chart is telling you will
meet with mixed long-term success, at best.
Don't misinterpret the message; the strategies outlined below are very powerful and can bring consistent results if used
wisely - which are within the scope of the larger Ichimoku picture. We ask that you always keep this in mind when
employing these strategies.
Tenkan Sen/Kijun Sen Cross

The tenkan sen/kijun sen cross is one of the most traditional trading strategies within the Ichimoku Kinko Hyo system.
The signal for this strategy is given when the tenkan sen crosses over the kijun sen. If the tenkan sen crosses above
the kijun sen, then it is a bullish signal. Likewise, if the tenkan sen crosses below the kijun sen, then that is a bearish
signal. Like all strategies within the Ichimoku system, the tenkan sen/kijun sen cross needs to be viewed in terms of
the bigger Ichimoku picture before making any trading decisions, as this will give the strategy the best chances of
success.
In general, the tenkan sen/kijun sen strategy can be classified into three major classifications: strong, neutral and
weak.
STRONG TENKAN SEN/KIJUN SEN CROSS SIGNAL

A strong tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens above the kumo.
A strong tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens below the kumo.
NEUTRAL TENKAN SEN/KIJUN SEN CROSS SIGNAL
A neutral tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens within the kumo.
A neutral tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens within the kumo.
WEAK TENKAN SEN/KIJUN SEN CROSS SIGNAL
A weak tenkan sen/kijun sen cross Buy signal takes place when a bullish cross happens below the kumo.
A weak tenkan sen/kijun sen cross Sell signal takes place when a bearish cross happens above the kumo.
See the chart in Figure I below for an example of several classifications of the tenkan sen/kijun sen cross:
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FIGURE I - Tenkan Sen/Kijun Sen Cross Classifications

But wait! Have you checked the chikou span?
With these three major classifications in mind, we will add something else into the equation - the chikou span. As we
explained in the section detailing the chikou span, this component acts as a "final arbiter" of sentiment and should be
consulted with every single trading signal in the Ichimiku Kinko Hyo charting system. The tenkan sen/kijun sen cross
is no different. Each of the three classifications of the TS/KS cross mentioned above can be further classified based on
the chikou span's location in relation to the price curve at the time of the cross. If the cross is a "Buy" signal and the
chikou span is above the price curve at that point in time, this will add greater strength to that buy signal. Likewise, if
the cross is a "Sell" signal and the chikou span is below the price curve at that point in time, this will provide
additional confirmation to that signal. If the chikou span's location in relation to the price curve is the opposite of the
TS/KS cross's sentiment, then that will weaken the signal.
Entry
The entry for the tenkan sen/kijun sen cross is very straightforward - an order is placed in the direction of the cross
once the cross has been solidified by a close. Nevertheless, in accordance with good Ichimoku trading practices, the
trader should bear in mind any significant levels of support/resistance near the cross and consider getting a close
above those levels before executing their order.
Exit
The exit from a tenkan sen/kijun sen cross will vary with the particular circumstances of the chart. The most
traditional exit signal is a tenkan sen/kijun sen cross in the opposite direction of your trade. However, personal risk
management and time frame concerns may dictate an earlier exit, or an exit based upon other Ichimoku signals, just as
in any other trade.
Stop-Loss Placement
The tenkan sen/kijun sen strategy does not dictate use of any particular Ichimoku structure for stop-loss placement,
like some other strategies do. Instead, the trader should consider their execution time frame and their money
management rules and then look for the appropriate prevailing structure for setting their stop-loss.
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Take Profit Targets

Take profit targeting for the tenkan sen/kijun sen cross strategy can be approached in one of two different ways. It can
be approached from a day/swing trader perspective where take profit targets are set using key levels, or from a
position trader perspective, where the trader does not set specific targets but rather waits for the current trend to be
invalidated by a tenkan sen/kijun sen cross transpiring in the opposite direction of their trade.
Case Study
In the 4H chart in Figure II below we can see a bullish tenkan sen/kijun sen cross at point A. Since this cross took
place within the kumo itself, it is considered a "neutral" buy signal, thus we wait for price to exit and close above the
kumo to confirm this sentiment before placing our long entry. Price does achieve a close above the kumo at point B
(1.5918) and we place our long entry at that point. For our stop-loss, we look for the place where our trade sentiment
would be invalidated. In this case, the bottom edge of the kumo provides us with just that at point C (1.5872).
Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while keeping an eye out for
potential exit signals. Price rises nicely for the next 10 to 11 days and then, on the 15th day of the trade, price drops
enough to have the tenkan sen cross below the kijun sen at point D. This is our exit signal, since Ichimoku is telling us
that the sentiment has changed, so we close our order at 1.6014 at point E for a total gain of over 95 pips.
FIGURE II - Tenkan Sen/Kijun Sen Cross Case Study

For maximum risk management on this trade, we also could have moved our stop-loss up with price once price was a
conservative distance away from our entry. One option for doing this would be to move the stop-loss up with the
kumo, keeping it just below the bottom edge. For even tighter risk management, we could have moved our stop-loss
with the kijun sen, keeping it 5 to 10 pips below that line as it moved up.
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Kijun Sen Cross

The kijun sen cross is one of the most powerful and reliable trading strategies within the Ichimoku Kinko Hyo system.
It can be used on nearly all time frames with excellent results, though it will be somewhat less reliable on the lower,
daytrading time frames due to the increased volatility on those time frames. The kijun sen cross signal is given when
price crosses over the kijun sen. If it crosses the price curve from the bottom up, then it is a bullish signal. If it
crosses from the top down, then it is a bearish signal. Nevertheless, like all trading strategies within the Ichimoku
Kinko Hyo system, the kijun sen cross signal needs to be evaluated against the larger Ichimoku "picture" before
committing to any trade.
In general, the kijun sen cross strategy can be classified into three major classifications: strong, neutral and weak.
STRONG KIJUN SEN CROSS SIGNAL
A strong kijun sen cross Buy signal takes place when a bullish cross happens above the kumo.
A strong kijun sen cross Sell signal takes place when a bearish cross happens below the kumo.
NEUTRAL KIJUN SEN CROSS SIGNAL
A neutral kijun sen cross Buy signal takes place when a bullish cross happens within the kumo.
A neutral kijun sen cross Sell signal takes place when a bearish cross happens within the kumo.
WEAK KIJUN SEN CROSS SIGNAL
A weak kijun sen cross Buy signal takes place when a bullish cross happens below the kumo.
A weak kijun sen cross Sell signal takes place when a bearish cross happens above the kumo.
See the chart in Figure III below for an example of several classifications of the kijun sen cross:
FIGURE III - Kijun Sen Cross Classifications

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Chikou span confirmation

As with the tenkan sen/kijun sen cross strategy, the savvy Ichimoku trader will make good use of the chikou span to
confirm any kijun sen cross signal. Each of the three classifications of the kijun sen cross outlined above can be
further classified based on the chikou span's location in relation to the price curve at the time of the cross. If the cross
is a "Buy" signal and the chikou span is above the price curve at that point in time, this will add greater strength to that
buy signal. Likewise, if the cross is a "Sell" signal and the chikou span is below the price curve at that point in time,
this will provide additional confirmation to that signal. If the chikou span's location in relation to the price curve is the
opposite of the kijun sen cross's sentiment, then that will weaken the signal.
Entry
The entry for the kijun sen cross is very straightforward - an order is placed in the direction of the cross once the cross
has been solidified by a close. Nevertheless, in accordance with good Ichimoku trading practices, the trader should
bear in mind any significant levels of support/resistance near the cross and consider getting a close above those levels
before executing their order.
Exit
A trader exits a kijun sen cross trade upon their stop-loss getting triggered when price crossing the kijun sen in the
opposite direction of their trade. Thus, it is key that the trader move their stop-loss in lockstep with the movement of
the kijun sen in order to maximize their profit.
Stop-Loss Placement
The kijun sen cross strategy is unique among Ichimoku strategies in that the trader's stop-loss is determined and
managed by the kijun sen itself. This is due to the kijun sen's strong representation of price equilibrium, which makes
it an excellent determinant of sentiment. Thus, if price retraces back below the kijun sen after executing a bullish kijun
sen cross, then that is a good indication that insufficient momentum is present to further the nascent bullish sentiment.
When entering a trade upon a kijun sen cross, the trader will review the current value of the kijun sen and place their
stop-loss 5 to 10 pips on the opposite side of the kijun sen that their entry is placed on. The exact number of pips for
the stop-loss "buffer" above/below the kijun sen will depend upon the dynamics of the pair and price's historical
behaviour the kijun sen as well as the risk tolerance of the individual trader, but 5 to 10 pips should be appropriate for
most situations. When looking to enter Short, the trader will look to place their stop-loss just above the current kijun
sen and when looking to enter Long, the trader will place their stop-loss just below the current kijun sen.
Once the trade is underway, the trader should move their stop-loss up/down with the movement of the kijun sen,
always maintaining the 5 to 10 pip "buffer". In this way, the kijun sen itself acts as a "trailing stop-loss" of sorts and
enables the trader to keep a tight hold on risk management while maximizing profits.
Take Profit Targets
Take profit targeting for the kijun sen cross strategy can be approached in one of two different ways. It can be
approached from a day/swing trader perspective where take profit targets are set using key levels, or from a position
trader perspective, where the trader does not set specific targets but rather waits for the current trend to be invalidated
by price crossing back over the kijun sen in the opposite direction of their trade.
Case Study
In the 1D chart in Figure IV below for USD/CHF we can see a bullish kijun sen cross at point A. While the initial
cross is above the kumo and therefore a relatively strong cross, it is still beneath a very key chikou span level (not
visible on this chart), so we wait until we get a close above that key level before entering at point B. At this point, we
also have the additional benefit of confirmation from a bullish tenkan sen/kijun sen cross and a nice upward angle to
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the kijun sen, bolstering our prospects for more bullish price action even more. For our stop-loss, we follow the kijun
sen trading strategy guidelines and place it 10 pips below the prevailing kijun sen at point C.
Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while continually moving up our
stop-loss with the kijun sen. Price rises nicely for the next 40 days staying well above the kijun sen. After this point,
price begins to drop and, on the 44th day, price crosses the kijun sen and hits our stop-loss at point D closing out our
trade and netting us a profit of 641 pips.
FIGURE IV - Kijun Sen Cross Case Study
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Kumo Breakout
Kumo Breakout trading or "Kumo Trading" is a trading strategy that can be used on multiple time frames, though it is
most widely used on the higher time frames (e.g.: Daily, Weekly, Monthly) of the position trader. Kumo breakout
trading is the purest form of trend trading offered by the Ichimoku charting system, as it looks solely to the kumo and
price's relationship to it for its signals. It is "big picture" trading that focuses only on whether price is trading above or
below the prevailing kumo. In a nutshell, the signal to go long in Kumo breakout trading is when price closes above
the prevailing kumo and, likewise, the signal to go short is when price closes below the prevailing kumo.
See the chart in Figure V below for an example of a kumo breakout buy signal:
FIGURE V - Kumo Breakout Buy Signal
Entry
The entry for the kumo breakout trading strategy is simple - when price closes above/below the kumo, the trader
places a trade in the direction of the breakout. Nevertheless, care does need to be taken to ensure the breakout is not a
"head fake" which can be especially prevalent when the breakout takes place from a flat top/bottom kumo. To
ensure the flat top/bottom is not going to attract price back to the kumo, it is always advisable to look for another
Ichimoku structure to "anchor" your entry to just above/below the kumo breakout. This anchor can be anything from a
key level provided by the chikou span, a kumo shadow or any other appropriate structure that could act as additional
support/resistance to solidify the direction and momentum of the trade.
Kumo breakout traders also make good use of the leading kumo's sentiment before committing to a trade. If the
leading kumo is a Bear kumo and the kumo breakout is also Bear, then that is a very good sign that the breakout is not
an aberration of excessive volatility, but rather a true indication of market sentiment. If the leading kumo contradicts
the direction of the breakout, then the trader may want to either wait until the kumo does agree with the direction of
the trade or use more conservative position sizing to account for the increased risk.
Exit
The exit from a kumo breakout trade is the easiest part of the whole trade. The trader merely waits for their stop-loss
to get triggered as price exits the opposite side of the kumo on which the trade is transpiring. Since the trader has been
steadily moving their stop-loss up with the kumo during the entire lifespan of the trade, this assures they maximize
their profit and minimize their risk.
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Stop-Loss Placement
Being a "big picture" trend trading strategy, the stop-loss for the kumo breakout strategy is placed at the point that the
trend has been invalidated. Thus, the stop-loss for a kumo breakout trade must be placed on the opposite side of the
kumo that the trade is transpiring on, 10 - 20 pips away from the kumo boundary. If price does manage to reach the
point of the stop-loss, the trader can be relatively assured that a major trend change has taken place.
Take Profit Targets
While traditional take profit targets can be used with the kumo breakout trading strategy, it is more in-line with the
long-term trend trading approach to simply move the stop-loss up/down with the kumo as it matures. This method
allows the trade to take full advantage of the trend without closing the trade until price action dictates unequivocally
that the trend is over.
Case Study
In the Weekly chart in Figure VI below for AUD/USD we can see a bearish kumo breakout taking place at point A.
We also see that that leading kumo is distinctly bearish as well, which acts to confirm our breakout sentiment. Given
that price is exiting from a flat-bottom kumo and that we want to reduce any risks of entering on a false breakout, we
look for a close below the last chikou span support at .7600 before entering. The close we are looking for is achieved
shortly thereafter at point B and we enter short.
For our stop-loss, we follow the kumo breakout guideline of placing it 10 - 20 pips away from the opposite side of the
kumo where our breakout is taking place. In this case, we place it 20 pips away from the top of the kumo above our
entry candle at point C (.7994).
Once we place our entry and stop-loss orders, we merely wait for the trade to unfold while continually moving our
stop-loss down with the prevailing kumo. Given that we are using the Weekly chart as our execution time frame, we
prepare ourselves for a very long-term trade. In this case, nearly two years later, price rises enough to break out of the
kumo to the other side, where it triggers our buy order some 20 pips away at point D netting us over 1100 pips in the
process.
FIGURE VI - Kumo Breakout Case Study
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Senkou Span Cross

The Senkou span cross is one of the lesser known trading strategies within the Ichimoku Kinko Hyo system. This is
mostly due to the fact that the Senkou span cross tends to be more commonly used as an additional confirmation with
other trading strategies rather than being used as a standalone trading strategy in its own right. However, it is
nonetheless a solid trend trading strategy and can definitely be used on its own.
Given that the Senkou span cross strategy, like the kumo breakout trading strategy, utilize the kumo for signal
generation, it is best employed on the longer time frames of the Daily chart and above. The Senkou span cross signal
is given when the Senkou span A line crosses over the Senkou span B line of the kumo. If the Senkou span A crosses
the Senkou span B from the bottom up, then it is a bullish signal. If it crosses from the top down, then it is a bearish
signal. Nevertheless, like all trading strategies within the Ichimoku Kinko Hyo system, the Senkou span cross signal
needs to be evaluated against the larger Ichimoku "picture" before committing to any trade.
The thing to keep in mind with the Senkou span cross strategy is that the "cross" signal will take place 26 periods
ahead of the price action as the kumo is time-shifted 26 periods into the future. This relationship is obvious when one
looks at the current price on a live chart, but less so when looking at historical price action. In addition, while all
Ichimoku strategies should be exercised with the larger Ichimoku picture in mind, this is particularly important with
the Senkou span cross. Thus, determining the overall trend on higher time frames first and then taking only Senkou
span signals that align with that trend on the lower timeframes is the best implementation of the Senkou span strategy.
In general, the Senkou span cross strategy can be classified into three (3) major classifications: strong, neutral and
weak.
STRONG SENKOU SPAN CROSS SIGNAL
A strong Senkou span cross signal takes place when the price curve is on the side of the kumo that matches
the sentiment of the Senkou span cross.
NEUTRAL SENKOU SPAN CROSS SIGNAL
A neutral Senkou span cross signal takes place when the price curve is inside the kumo at the time of the
Senkou span cross.
WEAK SENKOU SPAN CROSS SIGNAL
A weak Senkou span cross signal takes place when the price curve is on the opposite side of the kumo that
matches the sentiment of the Senkou span cross.
The chart in Figure VII below shows some classifications of the Senkou span cross. The dashed vertical lines
represent the 26-period relationship between price and the Senkou span cross. Thus, point A represents a bullish
Senkou span cross that can be categorized as a "strong" buy signal due to the fact that price (point B), at the point of
the cross, was trading above the kumo. Likewise, point C represents a bearish Senkou span cross that generated a
strong sell signal due to price's location at point D below the kumo. The Senkou span cross at Point E generated a
neutral buy signal since price (point F) was trading within the kumo at that point.
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FIGURE VII - Senkou Span Cross Classifications

Entry
The entry for the Senkou span cross trading strategy is relatively simple, though, as mentioned above, entries do
require even more attention to the overall trend on higher time frames before executing any trades. After determining
the trend on the higher time frames, the trader looks for a fresh Senkou span cross in the same direction as the overall
trend that has been solidified by a close on the execution time frame. Once they identify a suitable opportunity, they
initiate a position in the direction of the Senkou span sentiment. As in all Ichimoku trading strategies, traders will be
well-advised to consider the relative strength of the cross (vis-a-vis price's location relative to the kumo) as well as the
sentiment provided by the remaining Ichimoku components at the time of the cross in order to ensure the most
optimum entry.
It is worth mentioning here that the strong bull (buy) signal outlined in our first chart that took place in April of 2005,
while technically strong from a 1D perspective, was not aligned with the overall downtrend in-place on the Weekly
and Monthly charts. Thus, traders taking this trade signal and using a Senkou span cross in the opposite direction as
their exit signal would have actually lost pips. This underscores the importance of evaluating sentiment on multiple
time frames and trading with the overall trend.
Exit
The exit from a Senkou span cross trade is generally signalled by a Senkou span cross in the opposite direction of the
trade, though other exit signals may be taken depending upon the trader's risk tolerance and profit goals.
Stop-Loss Placement
Being a "big picture" trend trading strategy like the kumo breakout strategy, the stop-loss for the Senkou span cross
strategy is placed on the opposite side of the kumo that the trade is transpiring on, 10 - 20 pips away from the kumo
boundary.
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Take Profit Targets

While traditional take profit targets can be used with the Senkou span cross trading strategy, it is more in-line with the
long-term trend trading approach to wait for a Senkou span cross to transpire in the opposite direction of the trade
before closing out the position. This method allows the trade to take full advantage of the trend without closing the
trade until price action dictates unequivocally that the trend is over.
Case Study
In the Daily chart in Figure VIII below for USD/CAD we can see a bearish Senkou span cross at point A. This cross
corresponds to the candle at point B. Since the candle closed just below the kumo, the signal is considered a strong
one given that its sentiment agrees with the sentiment of the bearish Senkou span cross. In addition, we confirm that
the direction of this signal is aligned with the overall downtrend in-place on the Weekly and Monthly time frames, so
we know that we are trading with the trend. Nevertheless, we are wary of the flat bottom kumo just to the right of the
candle, which could act as an attractor for price, so we look for a conservative entry point that will ensure we will not
get caught in any false breakouts. The last chikou span support at 1.2292 looks like a good anchor point for assuring
this. Price closes below this point a couple of days later at 1.2290 and we enter short at point C.
For our stop-loss, we follow the kumo breakout guideline of placing it 10 - 20 pips away from the opposite side of the
kumo where our trade is taking place. In this case, we place it 20 pips away from the top of the kumo above our entry
candle at point D (1.2542).
Once we place our entry and stop-loss orders, we wait for the trade to unfold while continually moving our stop-loss
down with the prevailing kumo. In this case, a bit more than four months later, price ranging has created a fresh
Senkou span cross in the opposite direction of our trade at point E, corresponding to the candle at point F where we
close out our trade at 1.1908, netting us over 380 pips in the process.
FIGURE VIII - Senkou Span Cross Case Study
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Chikou Span Cross

For those that have been using the Ichimoku Kinko Hyo charting system for any length of time, utilizing the chikou
span cross strategy should be like second nature. Why? Because the chikou span cross is essentially the "chikou span
confirmation" that savvy Ichimoku traders utilize to confirm chart sentiment before entering any trade. This
confirmation comes in the form of the chikou span crossing through the price curve in the direction of the proposed
trade. If it crosses through the price curve from the bottom up, then it is a bullish signal. If it crosses from the top
down, then it is considered a bearish signal.
Thus, we already know the power of the chikou span cross via its use as a confirmation strategy. However, when used
within some simple guidelines, the chikou span cross can be used as its own standalone trading strategy with very
good success.
Like many other Ichimoku trading strategies, the chikou span cross strategy uses price's relationship to the kumo to
categorize its signals into three major classifications: strong, neutral and weak.
STRONG CHIKOU SPAN CROSS SIGNAL
Buy signal takes place when a bullish cross takes place and current price is above the kumo
Sell signal takes place when a bearish cross takes place and current price is below the kumo.
NEUTRAL CHIKOU SPAN CROSS SIGNAL
Buy signal takes place when a bullish cross takes place and current price is within the kumo
Sell signal takes place when a bearish cross takes place and current price is within the kumo.
WEAK CHIKOU SPAN CROSS SIGNAL
Buy signal takes place when a bullish cross takes place and current price is below the kumo
Sell signal takes place when a bearish cross takes place and current price is above the kumo.
The chart in Figure IX below provides several examples of the chikou span cross. Given the fact that the chikou span
is a measure of closing price shifted 26 periods into the past, we must always keep in mind both the location of the
chikou span in relation to the price curve (the "cross" itself) and the current candle and its relation to the kumo. Thus,
Point A1 is the point where the chikou span crossed the price curve downward and Point A2 is the closing candle that
initiated that bearish cross. However, since the candle at Point A2 was above the prevailing kumo at the point of the
cross, this particular signal would be categorized as a "weak" bearish cross. A strong bullish cross can be seen in
Points B1 and B2 since the chikou span crossed upward through the price curve and the closing candle at that point in
time was above the prevailing kumo. Points C1 and C2 represent a weak bearish cross given that they transpired above
the prevailing kumo.
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FIGURE IX - Chikou Span Cross Classifications

Entry
The entry for the chikou span cross is relatively straightforward - the trader initiates a position in the direction of the
chikou span cross after taking into consideration the cross's strength and other chart signals. For the highest
probability of success, the trader will also look for the chikou span itself to be free of the kumo as the chikou span can
often interact with the kumo much like the price curve.
Exit
The most traditional exit for a chikou span cross trade is generally signalled by a chikou span cross in the opposite
direction of the trade, though other exit signals may be taken depending upon the trader's risk tolerance and profit
goals.
Stop-Loss Placement
The chikou span strategy does not dictate use of any particular Ichimoku structure for stop-loss placement, like some
other strategies do. Instead, the trader should consider their execution time frame and their money management rules
and then look for the appropriate prevailing structure for setting their stop-loss.
Take Profit Targets
Take profit targeting for the chikou span cross strategy can be approached in one of two different ways. It can be
approached from a day/swing trader perspective where take profit targets are set using key levels, or from a position
trader perspective, where the trader does not set specific targets but rather waits for the current trend to be invalidated
by a chikou span cross transpiring in the opposite direction of their trade.
Case Study
In the Daily chart in Figure X below for USD/CHF we can see a bullish chikou span cross at point A. However, while
it is technically a strong cross, the chikou span is still below significant resistance provided by the two chikou span
points at 1.2090. In addition, the tenkan sen and kijun sen are in a flat configuration which doesn't provide any
additional confirmation. Thus we wait for a more convincing setup before entering Long. This is achieved five days
later at Point B1 when the chikou span moves back up through the price curve after a brief dip below. We wait for the
daily candle to close and then enter long at 1.2164 at Point B2. Our confidence in this entry is increased by the bullish
tenkan sen/kijun sen cross that has since transpired.
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For our stop-loss, we consider the prevailing structures and decide to place it just below the kijun sen at 1.1956, since
a cross below that point will not only have the chikou span executing a fresh bearish cross, but also have price
executing a bearish kijun sen cross, both of which would invalidate our long position.
Once we place our entry and stop-loss orders, we wait for the trade to unfold. Depending upon our trading style, we
could opt to trail our stop-loss along with the kijun sen to keep a tighter rein on risk management or we could utilize
the more traditional method of waiting for a chikou span cross in the opposite direction of our trade. In this case, a
chikou span cross in the opposite direction takes place just under two months later (Point C1) at 1.2619 (Point C2) and
we close out our trade for a gain of over 450 pips. It is worth noting that, even though the chikou span cross on its own
would be considered technically "weak" due to its location above the kumo, it is bolstered by a bearish tenkan
sen/kijun sen cross to form a bearish three-line pattern. Alternatively, if we had chosen to use the kijun sen as our
trailing stop in this trade, instead of waiting for a chikou span cross, we would have exited somewhere around the
1.2735 level, which would have netted us over 560 pips.
FIGURE X - Chikou Span Cross Case Study
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Other Resources
Websites:
Blog: www.ichimokuwebsite.com
Wiki: www.ichimoku.org
Forum: www.kumotrader.com
Videos/Articles: www.ichimokutrade.com
Multi-Timeframe Signals: www.ichimokutrade.com
Facebook: http://www.facebook.com/Ichitrader
Twitter: http://www.twitter.com/ichimokutrading
YouTube: https://www.youtube.com/sunman4008
Books:
Learn more on how to simplify trading and generate results without looking at charts
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Ichimoku Quick Start Guide

By Robert C. Joiner

Could a Japanese journalist from the 1940s help you predict the future
movement of stocks?

Welcome to this Quick Start Guide to using the Ichimoku charts. For most of you, the
term Ichimoku is a brand new term for you. You may have never heard the word, much
less seen a chart example. And Ill be honest with you. When I first looked at an Ichimoku
chart, I thought No way. This is far too confusing to be of any use to me. But then I did
a little study, finding bits and pieces of information, scattered here and there among
various web sites. And the subject began to intrigue me. As I understood more and more
about what the charts were telling me, I became hookedbecause the charts reveal so
much and (once understood) can improve your trading substantially.

So, in this Quick Start Guide, Ill tell how the charts began. Ill introduce the key terms
and definitions. Ill show you examples. And then Ill discuss some of the key uses for
these charts in your own trading.

Now, before you get carried away and think youve got to pay a lot of money to get access
to these charts, let me set the record straight. These charts are becoming available on more
and more chart services. Offhand, I can think of three places to find these charts. At
www.worden.com, the Ichimoku charts are available on their StockFinder charts and at
www.freestockcharts.com. And they are available at www.stockcharts.com. Youll often

find them as an optional overlay among the many technical indicators offered by these
services.
A Short History of Ichimoku

One of our greatest imports was candlestick charting. Created for trading the rice market
about 150 years ago, candlestick charts are widely used by traders today. Why? Because
they give a better visual representation of price movement and investor sentiment than the
old bar charts.

Well, in the 1940s a Japanese journalist by the name of Goichi Hosoda began creating
moving averages for these candlesticks. Prior to the advent of computer programming, his
elaborate system utilized dozens of workers who plotted his moving averages each day.

And it wasnt an ordinary system of moving averages. Goichi used a variety of moving
averages, plotting them both in their current time frame and also plotting them into the
future. These moving averages give support and resistance lines, much like traditional
western moving averages. But Goichi also pointed these numbers into the future, giving
the charts an almost predictive nature.

So let me ask you a question. If you could look into the future of a chart, looking at
possible areas of support and resistance in future time (not just current time), do you think
it could help your trading? Of course it could help you.

But Goichi also looked backward. He noticed that chart prices move in undulating waves
(what I have called S-curves) and that future price movement can also be somewhat
predicted by plotting current price into its past price curve. (I call it the historical price
curve.)

So, to summarize, Ichimoku charts look at past, current, and future indications of price
movement. This combination, though not simple to understand, has huge merits above our
traditional western technical analysis. In fact, Ichimoku charts could replace our typical
charts, just as candlesticks have replaced bar charts for many traders. In Japan, for
example, Ichimoku charts are the primary charts used for trading. And, once you begin to
understand them, they may become your preferred chart platform as well.

Theres only one small problem. Very little has been written in English about Ichimoku
charts. The primary reference tools are still in Japanese. So, unless you spend hundreds of
hours studying these charts, then you may find them a bit intimidating.

There are dozens of books available about technical analysis. In fact, the interpretation of
candlesticks alone has created a plethora of books to aid the traders understanding of
them. But the study of Ichimoku charts in English is very new. And this Quick Start
Guide aims to get you started on the journey.

First, I need to make a disclaimer. This report is not intended to be a complete primer on
using Ichimoku charts. My Ichimoku Swing Trading System combines both eastern and
western indicators. And this system takes more than just a few pages to cover all of the
material. But this Quick Guide will get your started. Ill cover the key terms and
definitions of Ichimoku charts. And Ill cover some of the basics for how to use them in
your trading. If you want to learn more, then I encourage you to read and study the entire
Ichimoku Swing Trading System text.
Terms and Definitions

So, weve talked about the history of Ichimoku and Ive described some of the possible
value to you as a trader. Now lets go ahead a take a look at an example.
Chart 1

If Chart 1 is your first look at an Ichimoku chart, then it probably looks very confusing to
you. You see a bunch of different lines and areas of green and pink. Then you see your
traditional candlesticks. Youre looking at a five month chart of the Dow, during 2010.
Beginning on the left side of the chart, see how price moves along the blue line and then
falls beneath it in early May. Then you see price going back and forth in that green cloudy
area before it falls again. Also see the green line that comes crashing through price back in
late March. And notice how that cloudy area extends off to the right edge of the chart.

Now lets break down each area and see what it all means.
Chart 2

A central piece of the Ichimoku chart is the Kumo. Kumo means cloud, and thats what it
looks like on your chartthose green and pink areas of the chart. So how are they
created? To create the Kumo, you begin with two plotted linesSenkou Span A and
Senkou Span B. Span A is created by taking the 9 and 26 moving averages (these moving
averages use the mid-point of the candle, not the closing price of the candle) and dividing
their total by 2. Span B is created by taking the high and low prices of the previous 52
periods and dividing that total by 2. Then, to make it more interesting, the answers to both
equations are dropped onto the chart, 26 days into the future. Thats why the Kumo
extends to the right edge of the chart, even though the market hasnt gotten to that point
yet. Once we have Span A and B plotted into the future, we color the area in between the
lines. If Span A is on top, then the Kumo is green. If Span B is on top, then the Kumo is
pink.

That was fun, wasnt it? Now, think of the Kumo as an area of support and resistance. In
the West, we generally draw single horizontal lines for support and resistance. But
Ichimoku gives us an area. Take a look at mid-May in the above chart. You can see how
the Kumo provided both support and resistance during that time, with prices often
stopping right on the Span lines.

So heres the general rule. If price is above the Kumo, then the stock or index is said to be
bullish. If price is below the Kumo, then the stock or index is said to be bearish. In Chart
2, we have examples of both bullish and bearish periods in the market. And you can see
how price, once it moves through the Kumo, tends to stay on that side of the Kumo for a
while.
Chart 3

Chart 3 introduces two new terms to youTenkan-Sen and Kijun-Sen. These are simple
moving averages, but once again we use the mid-point of the price candle rather than the
closing price of the candle. Tenkan-Sen is a 9-day moving average. Kijun-Sen is a 26-day
moving average. These averages are plotted in current time. You can also think of these
lines as lines of support and resistance. As I mentioned earlier, the Tenkan-Sen provided
price support during the first three months on this chart. So, price above the Kumo, riding
the support line of Tenkan-Sen, is a very bullish move in price. Just as with western
moving averages, the crossing of these moving averages is of great importance.

Chart 4

Chart 4 introduces the term Chikou Span, also spelled Chiku. This is perhaps the most
difficult thing for western analysts to grasp, even though it is actually very simple. The
Chiku is todays closing price, projected 26 days into the past.

On the above chart, Ive drawn a green line with two arrows pointing to it. If you take the
closing price of the last candle on this chart, and draw a horizontal line as Ive done, then
it shows the end point of the Chiku Span. Now, you may ask, why would I want to do
that? Well, Goichi Hosoda discovered that the movement of price often repeats itself in
patterns. Price patterns of the past can often influence price patterns of the future. So, he
plotted this line onto the chart. Many viewers of Ichimoku charts consider this simple line
one of the strongest indicators of future price movement. The general rule is this: if Chiku
is below the historical price curve, then this is a bearish sentiment. If it is above the
historical price curve, then this is a bullish sentiment.

So now you know the essential terms and definitions for using Ichimoku charts. Although
it takes a good bit of study to begin using these charts for actual entry and exit decisions,
perhaps you can already see the unique value they bring to technical analysis. Ichimoku
charts looks at future price support and resistance, current price trends, and previous price
patterns. Combining these three views onto one chart, you get the sense that you are
looking at the stock with a wide angle lens. Or, to give my paraphrase of the term
Ichimoku, a quick glance by a man on a mountaintop.
Whats the practical value?

Knowing the terms is of little practical value though. You have to begin using the
information in your own analysis of stocks. And, in this Quick Guide, I cannot go into a
huge amount of detail. But I can tell you some things to get you started. Lets look at a few
charts together.

Chart 5

In Chart 5, I have drawn two blue circles. The first blue circle shows how price fell below
the support line of the Tenkan-Sen. Soon thereafter, Tenkan-Sen crossed down and
through the Kijun-Sen. It took a few days for the two lines to diverge. But once they did,
the market saw a substantial decline. On that same chart, the second blue circle highlights
the last day of this chart. Since I am writing this Quick Guide on the day of this chart, I
dont know yet if the Tenkan-Sen will cross down and through the Kijun-Sen again. If the
two lines diverge, with Tenkan-Sen falling below Kijun-Sen, then watch out below. This is
a very bearish indicator since the crossover occurred beneath the Kumo. If that separation
occurs, then that is not a time to be buying stocks long.
Chart 6

Chart 6 shows another important leading indicator. The blue box shows the period when
Chiku Span (the green line) crossed down and through the historical price curve. Youll
see that price crossed through the candlesticks during that period and then made a failed
attempt to cross back up and through that line. The first cross down is a definite bearish
trend indicator. The failure of the Chiku to cross back up through that line was even more
bearish. Knowing these things helped me trade stocks in the correct direction.

Similarly, the markets bearish move after June 21st was expected by me. After a bullish
week in the market, many traders were thinking we were on a bull run in the market again.
But I knew differently. I remember studying the Ichimoku charts the weekend of June
19th. And I kept seeing one stock after another that was ready for a short entry. Even
though price seemed ready to pierce the thin Kumo of that period, I knew that it wasnt
going to happen. By combining Ichimoku charts with my traditional western indicators, I
picked out 12 stocks to short as swing trades. At the end of three days, one of those trades
was still at break even. There were no losers. And the average gain over three days was
4.5%. After seven market days, all 12 stocks were winners, with the average gain of
10.8%. Now, I dont know how those stats compare with your swing trade results. But
thats a larger gain in one week than most money managers can give you after a whole
year of trading. So Ill let you decide the merit of the system.
Conclusion

This concludes the Quick Guide to using Ichimoku charts. If it all seems confusing, then
go back and read this document again. Better yet, place it beside your computer and use it
as a reference tool as you study the stocks youre currently trading. Over time, youll get
more comfortable with the charts and their power to predict the future movement of price.

Good trading to you.
Technical Analysis Workshop Series

Ichimoku Cloud Charting
13th March 2014
Profile
Year 1 Business Administration
Started trading since 2012
Actively trading FX and keen on Technical Analysis
Currently pursuing a professional qualification in TA,
Certified Financial Technician (CFTe)
Running a small import-export business
DISCLOSURES & DISCLAIMERS

This research material has been prepared by NUS Invest.
NUS Invest specifically prohibits the redistribution of this material in whole or in part without the
written permission of NUS Invest.
The research officer(s) primarily responsible for the content of this research material, in whole
or in part, certifies that their views are accurately expressed and they will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this
research material.
Nothing in this research material constitutes a representation that any investment strategy or
recommendation contained herein is suitable or appropriate to a recipients individual
circumstances or otherwise constitutes a personal recommendation. It is published solely for
information purposes, it does not constitute an advertisement and is not to be construed as a
solicitation or an offer to buy or sell any securities or related financial instruments.
No representation or warranty, either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained herein. The research material
should not be regarded by recipients as a substitute for the exercise of their own judgement.
Any opinions expressed in this research material are subject to change without notice.
Outline
1.
2.
3.
4.
5.
Introduction
Key Components of Ichimoku
Piecing the Puzzle
Trade Examples
Conclusion
Introduction
Brief Introduction
Originally developed by Japanese journalist Goichi Hosada as
he was looking to develop The Ultimate Indicator
Full name is the ( Ichimoku Kink Hy) which
translates to one glance equilibrium chart
Successfully used in nearly every tradable market, not just
limited to those linked to Japan e.g. Yen-pairs on FX
Works on all timeframes but recommended for longer-term
positions e.g. 4hr and above
How it works
Moving average-based trend identification system factoring in
both time and price components
Illustrates the current trend, helps you time entries, displays
support and resistance, clarifies momentum, and shows you
when a trend has likely reversed all in one package
Considered a self-contained system where no additional
indicators are necessary
Standard settings for an Ichimoku chart indicator are 9, 26, 52
Ichimoku shows the past, present and the future
The Chart
cloud
???
Key Concept
The Trend Is
Your Friend!
Tenkan Line
Kijun Line
The 4 Key Components

of Ichimoku
Chikou Line
Kumo Cloud
Tenkan-sen (Trigger line)

Tenkan-sen () calculation: (highest high + lowest low)/2
for the last 9 periods.
Derived by calculating the overall midpoint between the
highest high and the lowest low for the past nine periods.
Primarily used as a signal line and a minor support/resistance
line
Indicator of the market trend
Tenkan-sen (Trigger line)
Called the Trigger Line because this is where all the action
takes place
Comparison with MAs
From the notion that taking average of the extremes >

taking average of the closing prices (Moving Averages)
Kijun-Sen (Base line)

Kijun-sen () calculation: (highest high + lowest low)/2
for the past 26 periods.
Calculated exactly the same way as Tenkan line but with a
longer look back period of 26 days
Used as a support/resistance level and as a confirmation line
If the price is higher than the Kijun line, it could continue to
climb higher and vice versa for lower prices.
Gives entry/exit signals when price crosses

Gradient determines trend direction and entry/exit points

Avoid entering during
ranging market to avoid
whipsaws
Flattened Kijun line attracts the

price like a magnet, signals a
ranging market
Support/Resistance Level
Kijun line acts as support/resistance levels, irregardless

of gradient
Chikou Span (Lagging line)

Chikou () span calculation: today's closing price projected
back 26 days on the chart
Used as a support/resistance aid
Is the last concluding signal in cloud chart analysis commonly
known as The Filter
If the Chikou Span (Lagging line) crosses the price in the bottomup direction, that's a buy signal. If the green line crosses the price
from the top-down direction, that's a sell signal
Interpretation
Purpose of shifting price back 26 periods is to compare

todays prices with that 26 periods ago
If current price < price 26 periods ago = Bearish
Entry Signals
Entry Signals
Chikou span (26 periods
behind) crossing below
price = SELL
Chikou span (26 periods
behind) crossing above
price = BUY
Assists in drawing support/resistance levels, but not a

support/resistance level in itself
Kumo (Cloud)
Kumo (, cloud) is the space between Senkou Span 1 and 2
Senkou () Span 1 calculation: (Tenkan-sen + kijun-sen)/2
plotted 26 periods ahead.
Senkou () Span 2 calculation: (highest high + lowest
low)/2 calculated over the past 52 time periods and plotted
26 periods ahead.
Changes in shape and height based on price changes and
market volatility
Kumo (Cloud)
The cloud is the space between the Senkou Span 1 and

the Senkou Span 2
Cloud is plotted 26 periods forward!
Trend Direction
The cloud reads the market and guides us on the trend

direction
The trend is your friend!
Trend Direction
When the Senkou Span A and Senkou Span B swap

places, it is an indication of change in trend direction
Trend Direction
The Kumo Twist is a replacement of cloud spans 26

candles forward that gives us an indication of trend change
Interpretations
General rule of thumb - Long above cloud and short

below cloud
Support/Resistance Levels
Thick cloud = High liquidity and good support/resistance

levels
Thin cloud = Low liquidity and easy to break
Trending vs. Ranging market
In Summary
The Chikou Span represents the past, the Tenkan and Kijun
lines represent the present and the Cloud represents the
future
Ichimoku works best in a trending market, staying clear
from any potential ranging markets that may cause
whipsaws
Avoid using these components individual Ichimoku is all
about the mess, use them all together!
Putting the Pieces
Together
Main Trigger
When Tenkan line crosses above the Kijun line Bullish

When Tenkan line crosses below the Kijun line Bearish
Bread and butter of Ichimoku
Main Trigger
Remember that Ichimoku works best in trending markets

and NOT ranging markets
Look out for gradient of Kijun line
Incorporating the Cloud
Buy signals stronger above cloud -> use top of cloud as support
Sell signals stronger below cloud -> use bottom of cloud as
resistance
Putting it all together
Tenkan and Kijun bullish crossover

Above cloud
Not in ranging market (cloud and Kijun)

Chikou span crosses price

entered after Tenkan
Kijun crossover and
missed out on this
amount
2)
3)
1)
If Tenkan and Kijun bullish crossover is below cloud, buy after:

1) Cloud changes direction
2) Prices emerge upwards from cloud
3) Chikou span crosses above price

SELL
3)
1)
2)
entered after Tenkan

Kijun crossover and
missed out on this
amount
If Tenkan and Kijun bearish crossover is above cloud, sell after:

1) Cloud changes direction
2) Prices emerge downwards from cloud
3) Chikou span crosses below price
General Rules for Exit

SELL
1)
2)
3)
Rule one: If the price crosses the Kijun line

Rule two: If the Tenkan line crosses the Kijun line
General Rules for Exit

SELL
1)
2)
3)
Rule one: If the price crosses the Kijun line

Rule two: If the Tenkan line crosses the Kijun line
Alternative Rules for Exit

SELL
1)
2)
3)
Using the support/resistance levels of the cloud as exit points

If prices rebound off these levels after closing trade, re-enter again
Stop Losses
Alternative Rules for Exit

SELL
1)
2)
3)
Trendline
Use other methods such as trendlines and candlestick patterns

Pairs well with trend-following indicators such as the ADX
Trade Examples
Market Makers
Market Outlook Report (09/03/14)

GBPJPY
(Short)
Price broke below Kijun line after taking support many times
Chikou Span broke below prices
Violation of significant trendline
Market Makers
Result
Market Makers
Market Outlook Report (03/02/14)

GBPUSD
(Short)
Candlestick patterns showing bearish implications

Prices broke through both cloud support levels
Prices taking resistance from bottom of cloud and Tenkan line
Chikou span crossed well below prices
Market Makers
Result
Flat Kijun line indicating
ranging market
Tenkan Kijun crossover
Continues on downtrend taking resistance on Tenkan until the Tenkan

Kijun crossover and price crossing above Kijun where an exit was made
Market Makers

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ICHIMOKU 101

Learn how to read ANY INSTRUMENT, ANY TIMEFRAME within 3 seconds

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1st leading line

CURRENT CLOSING PRICE time-shifted backwards (into the past) 26

2nd leading line

FIGURE 1 - Ichimoku Components

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FIGURE 1 - Tenkan Sen vs. 9 Period SMA

FIGURE II - Kijun Sen Support

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FIGURE III - Kijun Sen "Rubber Band" Effect

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FIGURE IV - Chikou Span in Bullish Configuration

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FIGURE V - Chikou Span in Bearish Configuration

FIGURE VI - Chikou Span Support and Resistance Levels

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The Kumo Cloud

FIGURE I - Kumo Support & Resistance

FIGURE II - Traditional S&R Theory vs. Ichimoku Kumo

Price's Relationship to the Kumo

FIGURE III - The Kumo and its Calculations

FIGURE IV - Kumo Sentiment

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FIGURE V - Flat Top and Flat Bottom Kumos

Ichimoku Kinko Hyo and Trend Trading

NEVER attempt to predict where the market will go

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Tenkan Sen/Kijun Sen Cross

STRONG TENKAN SEN/KIJUN SEN CROSS SIGNAL

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FIGURE I - Tenkan Sen/Kijun Sen Cross Classifications

Take Profit Targets

FIGURE II - Tenkan Sen/Kijun Sen Cross Case Study

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Kijun Sen Cross

FIGURE III - Kijun Sen Cross Classifications

Chikou span confirmation

FIGURE IV - Kijun Sen Cross Case Study

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FIGURE V - Kumo Breakout Buy Signal

FIGURE VI - Kumo Breakout Case Study

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Senkou Span Cross

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FIGURE VII - Senkou Span Cross Classifications

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Take Profit Targets

FIGURE VIII - Senkou Span Cross Case Study

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Chikou Span Cross

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FIGURE IX - Chikou Span Cross Classifications

FIGURE X - Chikou Span Cross Case Study

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Ichimoku Quick Start Guide

www.freestockcharts.com. And they are available at www.stockcharts.com. Youll often