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Trading with Ichimoku Clouds: The Essential Guide to Ichimoku Kinko Hyo Technical Analysis

by Manesh Patel (2010)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Trading with Ichimoku Clouds: The Essential Guide to Ichimoku Kinko Hyo Technical Analysis

by Manesh Patel

Quick Summary

A comprehensive guide to the Ichimoku Kinko Hyo charting system explaining its five components (Tenkan Sen, Kijun Sen, Chikou Span, Senkou Span A and B), cloud interpretation, and practical trading strategies using TradeStation examples.

Detailed Summary

Manesh Patel provides the first comprehensive English-language treatment of the Ichimoku Kinko Hyo ("one glance equilibrium chart") technical analysis system, originally developed by Japanese journalist Goichi Hosoda and published in the late 1960s. The book combines thorough explanation of each component with practical trading plan development.

The five components of the Ichimoku system are examined individually. The Tenkan Sen (conversion line, 9-period midpoint) serves as a short-term trend indicator and momentum gauge. The Kijun Sen (base line, 26-period midpoint) acts as an intermediate-term trend indicator and key support/resistance level. The Chikou Span (lagging span) plots the current close 26 periods back, providing confirmation of trend direction by comparing current price to past price. The Kumo Cloud, formed by Senkou Span A (midpoint of Tenkan and Kijun, plotted 26 periods forward) and Senkou Span B (52-period midpoint, plotted 26 periods forward), creates the system's signature visual element for identifying support, resistance, and trend.

The trading plan section develops specific strategies around each component and their combinations. Tenkan/Kijun crossovers generate buy and sell signals with varying reliability depending on their position relative to the cloud. Cloud breakouts signal major trend changes. The thickness of the cloud indicates the strength of support or resistance at various price levels. Cloud twists (where Senkou A and B cross) often coincide with trend reversals.

Patel explains the unique forward-looking nature of the Ichimoku system, which projects support and resistance levels 26 periods into the future through the Kumo cloud construction. This feature, unique among technical indicators, allows traders to anticipate zones of price congestion or breakout before price reaches them. The book includes extensive chart examples using TradeStation across multiple markets and timeframes.