Balkrishna M. Sadekar - How to Make Money Trading the Ichimoku System: Guide to Candelstick Cloud Charts

How to Make Money Trading Ichimoku Cloud Charts

Ichimoku Kinko Hyu, commonly referred to as Ichimoku indicator, is one of todays most powerful trading systems.

A Japanese innovation, like the candlesticks, it can be used with equal success to trade stocks, commodities, futures, currencies and bonds in fact, to anything that can be charted! Ichimoku also works very well on all time frames, from the weekly all the way down to the one-minute chart.

Loosely translated, Ichimoku chart means a one glance equilibrium chart. Due to the unique construction of the Ichimoku cloud, which is the heart of this system, a trader can visually determine in an instant whether a chart is bullish or bearish! Not just that:

• Ichimoku clearly defines support and resistance, identifies trend direction, gauges momentum, and provides trading signals.
• It is the only system with a built-in forward looking indicator.
• Looking at Ichimoku charts on multiple time frames can offer a tell-all x-ray into the dynamics of any market.
• It shows how to correctly time their entry and exit trades.
• Most charting platforms today offer Ichimoku as an indicator.

Packed with in-depth analysis of high-probability trading strategies and numerous real-market examples of stocks, derivatives, commodities and currency trades, this book reveals how you can make money using the powerful Ichimoku system, the candlestick cloud charts.

BALKRISHNA M. SADEKAR is the founder of Profitable Candlestick Charting LLC., an educational company providing training to stock traders in the proper use of candlestick charting and technical analysis. He is also a member of Technical Securities Analyst Association (TSAASF.org), a leading authority for technical analysis in the United States.

With a Masters degree in Engineering, Sadekar has passionately blended technology with investor psychology analysis via candlestick charts. A trader for more than a decade, he has trained and continues training novice and experienced traders in correctly applying trading systems for profiting from equity markets.

Sadekar resides in Richmond, VA in the US and can be reached via his website, www.ProfitableCandlestickCharting.com. His first book, How to Make Money with Candlestick Charts , also published by Vision Books, is a bestseller.

I would like to thank my loving parents and in-laws for their support throughout my life. I am also grateful for the wonderful support and love from my sister and her family.

I would like to thank folks at Chart Nexus for allowing me use of their stock charts. They have created an excellent technical analysis charting platform with all the necessary tools needed for evaluating stock charts.

I am thankful again to Vision Books India for believing in my efforts and publishing my second book with them.

Lastly, a special thanks to the two amazing individuals in my life, my wife and daughter. They continue to push me to achieve the best.

Introduction

Ichimoku Kinko Hyu, commonly referred to as Ichimoku, is one of the best systems available for trading the markets. The Ichimoku indicator can be applied to stocks, commodities, futures, currencies and bonds. If you can chart it, you can apply Ichimoku to it. It works very well on all time frames, from the weekly all the way down to one minute chart. For those familiar with candlestick charts, Ichimoku charts are a default extension of Japanese innovation.

Loosely translated, Ichimoku chart means a one glance equilibrium chart. Once a trader is familiar with the components of an Ichimoku system, it should take no more than a glance to decide if the chart is bullish or bearish. This was the purpose with which Goichi Hosoda invented this system. Goichi was a Japanese reporter who wanted to create an all-in-one indicator to visually depict the markets sentiment in the chart. After fine tuning it for many years, he finally published his findings in Japan in the late 1960s. This was the first publication on Ichimoku system and it got rapidly adopted by the Japanese traders and across Asia. Ichimoku started getting a following in the Western world in the 1990s as computers became widespread. The computation involved in developing and displaying the indicator got a lot easier with the help of computers. Most charting platforms today offer Ichimoku as an indicator.

The Ichimoku system is based on three numbers: 9, 26 and 52.

There are a few theories about why these numbers were used by Goichi when he developed the system.

In Japan, there were 26 trading days in a month in those days. So 52 days would account for two months of trading activity. The number 9 was about a week-and-a-half of trading. Another theory proposes that the number 26 was based on a lunar cycle. The fact is that it really does not matter. The Ichimoku system works with amazing accuracy with these original numbers. Traders often try to change and experiment with the number settings. Theres nothing wrong with that and you might want to do so as well. Please make sure, however, that you are not curve-fitting the settings. You might find some settings working flawlessly on a 5-minute chart, but when you try to use them on the daily chart, they fail dramatically. So keep that in mind if you want to play with different numbers on your Ichimoku chart. I would strongly suggest using the original numbers as they have stood the test of time on all time frames and across all asset classes.

As mentioned earlier, Ichimoku charts are meant to show investor sentiment at a glance. Another huge advantage of this system is that there is no need for other indicators and oscillators. One of the big dilemmas traders face is what indicators or oscillators to use. Choosing between hundreds of them and experimenting with their individual settings is a daunting task. Most times traders will use an indicator for a few trades and if the trades dont work, move on to the next indicator. This way, they never really get to experience the indicator in all situations. They keep moving from indicator to indicator and from one trading system to another, finally blowing out their account. There is no indicator, oscillator or trading system out there which will work 100% of the time. So is Ichimoku the holy grail for traders? Obviously not! The holy grail in trading is a myth. Each system has its flaws. It is how a trader uses the system that makes the system profitable. Remember that the goal of trading is to make more profits than losses. It is not to make only profitable trades. That is impossible. In fact, research has shown that successful traders have a higher number of losing trades than winning ones. They are successful because of one simple reason. The profits in their profitable trades are far higher than the losses in their losing trades. Most inexperienced traders have exactly the opposite situation. They go for quick profits, but let the losers run. This mindset needs to change! The Ichimoku system, with its dynamic support / resistance components is well suited to help the trader in adhering to strict rules.