2012 Ichimoku Analysis Update

Update for August 2012

The Ichimoku Cloud charts gave me advanced warning that August was going to be choppy and this this evolved to be just the case! I could tell at the end of July that we might be heading for some choppy markets given that a huge cloud was just in front of the USDX on the daily chart. The first 2 ~ 21/2 weeks of August were indeed very choppy. Price on the USDX emerged from the cloud at the end of the 3rd week of August and there were some 4 hr TS trends to be had. I actually scored 100 pips off a G/U long signal. I suspected that the last week of August might be choppy again though as although price had come out of the daily cloud for the USDX, the EURX was just about to head into its daily cloud. Price has indeed been choppy for 4 hr trend trading in this last week of August:

I found last April during similar choppy markets that trend trading was safest from the shorter time frame 30 min charts during the London or US sessions. The same has held true again for this choppy month. There were 2 TS trades last night on the E/U and the Swissie that were safe low risk 30 min TS trend trades:

Update for September 2012:

August 2012 was very choppy for currency trading and I received few TS signals on the 4hr charts.

August was a period where the EURX and USDX were mostly either embedded in the cloud on the daily Ichimoku charts or embedded in the weaving Tenkan/Kijun lines. The first week of September though proved to be great for TS and trend trading with up to 580 pips of TS signals in the one week. The second week of September gave up to 540 pips. Check the updated Ichimoku cloud charts below to view how August was very congested but the first two weeks of September were unencumbered:

Update for September 23rd 2012

Now, you may call me a slow learner but at least the penny drops with me eventually! The A/U was a bit choppy on the 4 hr this last week. This got me wondering and, then, ultimately searching. You see I never accept that things just go wrong or go ‘awol’ and this includes my TS signal system. I always go looking for a reason…it’s the scientist in me. So, the daily Ichimoku cloud charts for the Indices were clear this week but, then, the Ichimoku cloud 4 hr showed some potential choppiness looming:

USDXDaily Cloud: clear path

USDX 4hr Cloud: congested and thus possibly choppy:

So, I then thought that I should look more closely at the Ichimoku chart for the A/U itself. In hindsight this seemed pretty obvious!

A/U Daily Cloud: price action embedded in the cloud and thus potentially choppy.

A/U 4hr Cloud: price action embedded in the cloud and thus potentially choppy.

So, even though the average charts of the Indices were clear on the daily time frame, the 4 hr chart showed some potential choppiness might arise. Also, the individual chart for the A/U revealed possible choppiness on both time frames. Reference to these at the beginning of the week would have kept me from trading this pair, irrespective of the TS signal.

In Conclusion: I should look at the individual currency pair Ichimoku Cloud charts, as well as the over average of the indices, when assessing and choosing TS trend trade signals. You may consider this as limiting by adding extra filters to screen my TS signals. Trading is as much a matter of keeping out of bad trades as it is in getting into good trades though! I have amended my ‘Epiphany’ statement to reflect this latest learning.

End of September 2012 Update: Correlation of Daily and 4hr Ichimoku charts.

I believe that I have made some further progress with my learning and understanding of the Ichimoku indicator after trading through September. The first 2 weeks of September were great for trend trading but the last 2 weeks were very choppy. Price on the daily Ichimoku Indices charts was free from the Cloud though so this got me thinking and reviewing. I noticed that for the first 2 weeks of September that price and Cloud position on the daily and 4hr indices charts were positively correlated. That is, price was below the Cloud on the USDX on both the daily and 4 hr charts and above the Cloud on the EURX on both the daily and 4 hr charts. This correlation started to unwind through the final 2 weeks though (see charts for the USDX and EURX below):

USDX Daily Ichimoku Cloud Chart

USDX 4hr Ichimoku Cloud chart: September

EURX Daily Ichimoku Cloud Chart

EURX 4hr Ichimoku Cloud Chart: September 

I then went back to the charts to analyse the month of May as this month was fantastic for trend trading. I noticed that the 4hr Cloud chart for the USDX for each week of May correlated entirely with the daily Cloud chart:

USDX 4hr Ichimoku Chart: May

The EURX also revealed the same positive correlation between the daily and 4hr charts for the month of May:

EURX 4hr Ichimoku Chart: May

Conclusion: There seems to be another clear pattern emerging here: 4 hr trend trading is most successful when there is also correlation of price and Cloud position on both the 4hr and daily Ichimoku charts. I have added this extra learning to my final Epiphany statement.

Update November 10th 2012

I have had another Epiphany event with the Ichimoku Cloud Indicator. This follows on from the trading results coming from the end of the last week October and first week November. I had expected this period to be choppy for 4hr trading based on my observations of the Ichimoku chart. Price was below the Cloud on the daily chart but above the Cloud on the 4hr chart at the end of October. I expected the Cloud divergence alone to promote choppy 4hr trading conditions BUT this wasn’t the case:

So, if the Index was stuck in the Cloud on the daily chart and divergent from the 4hr chart why then was trading so good for this period? To answer this question I looked back over the charts and teased out some finer details. During this period price, on both the daily and 4 hr Cloud charts, was trending in the same direction AND unencumbered of the Tenkan/Kijun lines. These two factors seem to exert significant positive trading influence. So, being embedded in the daily Cloud wasn’t helpful BUT the trends were in the same direction on both time frames AND price was unencumbered of the Tenkan/Kijun lines.