Ichimoku Kinko Hyo Charts by Nicole Elliott
Here’s another charting method that’s been around for
decades, and yet can be brand-new to most Western audiences.
Ichimoku kinko hyo is a method of technical analysis
that has been around since before World War II, yet
is virtually brand-new to most Western audiences.
Why? Because textbooks on the subject have been,
until recently, available only in Japanese.
I joined Mizuho Bank as a senior analyst 10 years ago.
When I arrived, I realized much to my horror that all the
Japanese dealers I would be working with were well up to
speed with charts, and they used an incredibly complex
method that I hadn’t a clue about. These charts looked like a writhing mass of multicolored, tangled spaghetti! But curiosity
got the better of me. Risking the loss of face and career
prospects, I approached the Japanese dealer who spoke the
clearest English and asked him to explain. “Oh, these? They
are cloud charts,” he said, “and we use them all the time.” And
as I found out, Japanese dealers really do, and if you are
trading anything yen-related I urge you not to ignore them.
THE BUILDING BLOCKS
The key concept behind the ichimoku method is that price and
time are inextricably linked. Via laborious backtesting (by
hand!), newspaper writer Goichi Hosoda (who used the
pseudonym Ichimoku Sanjin) came up with four useful moving
average–type lines before World War II, finally publishing
a book on the subject in 1968. The lines are displaced forward and backward around
the basic building block, which
are daily candlesticks. These
are used just as conventional
bar charts: plotting trends,
looking for patterns, areas of
support and resistance, reversals,
and so on.