Using Ichimoku to trade the ES Mini

[Wall]

I am going to try to post what I do using the Ichimoku indicator. To read up on the basic methodology of how to use and understand the Ichimoku, this is the place to start:
http://www.kumotrader.com/ichimoku_wiki/index.php?title=Main_Page
and is by far the most authoritative site to learn from.

The posted chart traded today is live from Tradestation. I use the Kijun Sen (slower MovAvg) as the main indicator - if the close occurs above the Kijun the line turns red, otherwise it is green (thicker than the others). The Chikou Span (Delay Indicator) is colored as per the Senkou Cloud depending on if the price crosses above or below the Chikou. The Senkou (the Clouds) have two colors - a fill and an outline. As I mentioned in another post, this color arrangement often stops me from getting into trouble if I wait for the upper margin to match the body. The Cloud color changes will be discussed in a later post. This post is not an explanation of how I trade, nor is it trading advice, but just to get used to my color schemes. If we are successful in getting the pictures online, I will give my reasons and examples for the trades in further posts if there is interest - it is my actions alone and not advice on how to trade. I have to be honest - I use another indicator to confirm the entries (not just the Ichimoku alone) - this is heresy to the Ichimoku purists, but I am very insecure when it comes to losing my money. Perhaps I will post that combination at another time.
I trade S&P Eminis only. We can try to match the trades with FOREX if there is interest. I only use Tick charts. The Emini chart is set to 1200 ticks and is set to the CME based on CST. The chart is a 24 hour trading Globex chart. There are no other charts. Here we go.

 

[Wall]

I have just noticed that I am a "Newbie" - but I have been trading since 1994. New on this site I guess!!!

 

[timsk]

Hi Wall,
Welcome to T2W!
Yes, you are correct, the name tags by each member's username has nothing at all to do with their trading knowledge or experience, it simply relates to post count. We used to have a reputation system which went some way towards reflecting a member's trading knowledge or experience - but it was flawed and became abused. We're looking at possible alternatives, but it's a surprisingly complex subject!

Anyway, good luck with your thread - it's certainly good to have someone explain how they use Ichimoku charts as there are relatively few members who use them, if the number of threads featuring them is anything to go by. I looked at them a few years back and remember the site you mention and agree with you it is very good. One of the issues I had with them was that when the Japanese gentlemen that created them first introduced them in the 1950s or there abouts I think, the Japanese working week was very different to what it is now and, certainly, very different to the current western working week. As I recall, this has an impact on the default settings for the lengths and calculations of the moving averages? I forget the details, but I struggled to find anything in them that I could make work for me. Perhaps you'll change my mind.
Cheers,
Tim.

 

[Wall]

Thank you. It is interesting that the discussion often gets back to the number of days that used to be in the Japanese trading week. They used to work on Saturdays.
The breakdown actually goes to the function of the way the lines are constructed - basically they are just different lengths of a moving average. John Ehlers uses the Median Price ((H+L)/2) as his basic and then plays with various manipulations to substitute a value for length to create a Moving Average - e.g. his Instant Trend. In the Ichimoku, it is basically the same thing using the ((Highest High(Length) + the Lowest Low(Length))/2). So, we have the Range instead of the Close. Substitute different lengths and you have different Moving Averages. So use a Fast Length and a Slow Length and you have a two Moving Averages to compare to. Substitute 9 days and 26 days and you have the Fast and Slow Moving Averages of the actual number of days that were used for a trading month in Japan. This was found useful purely by empiric means at the time. The slow number of the Cloud, 52, is merely 2 months of trading days.
So, it really does not matter what the numbers are. There is no magic in them. Especially if one is using a chart that is not a Daily chart which the original was. But, as a fast moving average 9 is a good number and 26 is not bad. Ask yourself - what are the original lengths used for the MACD? 12, 26, 9! Why did we get 14 in the original RSI, %R and Stoch when there are not 14 days in 2 trading weeks. 15 would have been better. So, leaving the 9 and 26 as they are in the Ichimochu is the same as leaving the MACD as the original. BUT, there is no reason not to substitute one's favorite moving average lengths, for that is all that the Ichimoku really is - a visual picture of a combination and arrangements of 5 moving averages of the ((H+L)/2). How they are put together - not at all complicated; and how they work together as a picture will be the discussion. It is a function of Time and Price, but without Volume and that may not suit some. However direction is a function of supply and demand, which if taken into account is therefore a function of volume and is indirectly accounted for. So, in the intraday charts, the tick charts, the volume charts etc, any number will do, but the smaller the number the faster the reaction and the more the whipsaws what this technique was designed to avoid in trying to use the Trend method of trading.

 

[rathcoole_exile]

I am going to try to post what I do using the Ichimoku indicator. To read up on the basic methodology of how to use and understand the Ichimoku, this is the place to start:
http://www.kumotrader.com/ichimoku_wiki/index.php?title=Main_Page
and is by far the most authoritative site to learn from.

The posted chart traded today is live from Tradestation. I use the Kijun Sen (slower MovAvg) as the main indicator - if the close occurs above the Kijun the line turns red, otherwise it is green (thicker than the others). The Chikou Span (Delay Indicator) is colored as per the Senkou Cloud depending on if the price crosses above or below the Chikou. The Senkou (the Clouds) have two colors - a fill and an outline. As I mentioned in another post, this color arrangement often stops me from getting into trouble if I wait for the upper margin to match the body. The Cloud color changes will be discussed in a later post. This post is not an explanation of how I trade, nor is it trading advice, but just to get used to my color schemes. If we are successful in getting the pictures online, I will give my reasons and examples for the trades in further posts if there is interest - it is my actions alone and not advice on how to trade. I have to be honest - I use another indicator to confirm the entries (not just the Ichimoku alone) - this is heresy to the Ichimoku purists, but I am very insecure when it comes to losing my money. Perhaps I will post that combination at another time.
I trade S&P Eminis only. We can try to match the trades with FOREX if there is interest. I only use Tick charts. The Emini chart is set to 1200 ticks and is set to the CME based on CST. The chart is a 24 hour trading Globex chart. There are no other charts. Here we go.

a beautifully artistic representation of the fade off the Weekly Pivot
nicely played, although my charts probably look a bit cleaner

 

[Wall]

With reference to the angles of the Kijun to help decide on trading:
here the Kijun (Slow MA - 26) and the Tenkan (Fast MA - 9) have been changed to the same colors to decrease the contrast between the two. When the Tenkan crosses the Kijun going up they both turn green and when it crosses going down they both turn red.
These examples show that when the Kijun (or the Tenkan) is going horizontal (towards the "15 minutes-after" on the clock), this is not a time to trade. When they angle towards the "25 minutes-after" it is a strong down indication and if angled up toward the "5 minute-after", it is a strong buy sign.
Note also the Kumo when drawing straight edges is a good support and resistance point.