Elliott - Ichimoku Charts An introduction to Ichimoku Kinko Clouds

The book comprises six main chapters:

1. History. A brief history of candlesticks and the development of Ichimoku Kinko Hyo.
2. Constructing the Cloud Charts. First, a quick introduction to candlestick charts - the foundation of Ichimoku - and then a detailed explanation of how Ichimoku charts are constructed.
3. Interpretation of the Clouds. How to interpret the Cloud charts, including: identifying support and resistance levels; the significance of cloud thickness and the distance between price and cloud; and how to finesse trading positions.
4. The Three Principles. A discussion of the three principles of Ichimoku charts: the Wave Principle, Price Targets and the Timespan Principle.
5. Case Studies. Several case studies are included that work through in detail the interpretation of Ichimoku chart examples.
6. Option Trading with Clouds. How the unique combination of timing and price levels that is possible with Ichimoku analysis is particularly relevant for option trading strategies.

The web site supporting this book can be found at www.harriman-house.com/ichimoku.

A long time ago, and more years than I would care to admit to, I started my first City job as a junior dealer at the then small Bank of Scotland. Working in the money market section, with what at that time were cutting edge interest rate futures, my two bosses (there were only three of us) said:

You will be our expert on charts. All the futures dealers in Chicago use these, so off you go and learn.

And so I did. Later, armed with a pencil, graph paper, a couple of brief lessons under my belt and bare-faced cheek, I wormed my way in to the offices of the few jobbers and brokers who knew about Technical Analysis.

I immediately knew I had found my niche, and still today I often think my job is such fun. Everyday I have a jigsaw puzzle where I have all of the pieces, but there is no image to fit them to. You have to work the big picture out by yourself. It is also a little like dancing. Sometimes it is pure hard slog: tiring, tedious, repetitive, constant discipline, and my partner has two left feet. Then the other times (which more than make up for everything else) its truly fantastic, intuitive, creative, and I have Fred Astaire to lead me round the dance floor.

Over the years the pencil and paper were replaced with computer programs. Then one day I noticed a new technical study had been added to the vast array I already had to choose from. Called Ichimoku Kinko Hyo, I had never heard of it, despite having practised as a full-time Technical Analyst for almost twenty years. My initial reaction was one of shock-horror, when I looked at a chart and saw something that looked like a writhing mass of knotted, multi-coloured noodles.

I left the noodles alone for a while; but then ten years ago I went to work for a Japanese bank, and recognised the charts many of my Japanese colleagues were using: Spaghetti Junction! Curiosity got the better of me and - at the risk of losing my street cred as sole full-time chartist in a very macho dealing room - I asked them what these were.

Oh, cloud charts, they said. We all use them.

They did, and still do. And now I do too.

When the markets were quiet, I asked our very busy dollar/yen dealer, Harada-san, if he could explain them to me. Slowly (as he was very busy), and despite some language problems, I began to understand. Setting them up on my files, I started to use them every day. Questions arose as I went along, which then allowed me to progress to the next level with his explanations.

I now realise how much I owe Harada-san, because all the books on the subject are in Japanese and, quite frankly, I am too old to start learning a language in order to learn a new charting method.

This book distils what Ive learnt about Ichimoku Kinko Hyo over the last few years of working in a Japanese dealing room. I like the method and now use it every day - because it works. I hope you too find the clouds fascinating and profitable.