Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
This is going to be my first post so i decided to start with a system that i am conversant with.
For a start, ichimoku is multi time frame "pure price action" system constructed with 5 lines, each giving a clue on the present price action with relation to its historical price movement. The combination of these 5 lines together give the total picture.
I have seen some good post on ichi but somehow the core concept of the system is lost in looking for signals on when to buy / sell. Objective look at a very subjective market needs clear understanding on how the system is constructed and how it derives its signals.
Click on the word screenshots to learn how to do them. The rule is you cannot post LINKS until 5 posts. If you attach the images as opposed to using an external image source, you can do it from post 1.
ChiKou Span : The most important and often least understood indicator is the CS (ChiKou Span) which is a simple line chart shifted n-number of bars to the Left.
Sometimes, a simple line chart can provide us a lot of information about market structure and well known patterns that is not visible on candle sticks.
The main purpose of this indicator is to identify support and resistance and to draw trend lines.
When we look at historical price movement to make an assumption on future price action, we have to define our assumptions. That way when we know market has proven our assumptions wrong, we can safely and gracefully take our exit. I'll cover the assumption chapter later after introducing the 5 lines.
The tenkan sen is calculated in the following manner:
(HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods
KIJUN SEN ("standard line")
The kijun sen is calculated in the following manner:
(HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods
After much research and backtesting, Goichi Hosoda finally determined that the settings of 9, 26 and 52 were the ideal settings for obtaining optimum results with Ichimoku. He derived the number 26 from what was then the standard Japanese business month (which included Saturdays). The number 9 represents a week and a half and the number 52 represents two months.
But, personally i prefer using the 5,20,40 settings as we have 5 trading days in a week, 20 trading days in a month and bi-monthly has 40 trading days.
2. plot the highest high (green) and the lowest low (red) of the last 15 bars and the mid point of this 2 line is plotted as yellow line. This yellow line is the center of the 30 min tf bar. Every time a new 2 min bar is formed, a new high / low data is included. If this new bar makes a new high than its last 15 bars, then the yellow line shifts higher. If it forms a new low compared to its last 15 bars, then the yellow line shifts lower.
Every time, a new bar is formed, the last bar of the series of 15 bars is discarded. If the last bar was the lowest low among the 15 bars, then the yellow bar shifts higher as the lowest low of the 15 bars series got a higher low. This is irrespective of the fact that the new bar that is added need not be a new high / low bar.
3. we now plot the 60 bar highest high (green) and lowest low (red) and plot the midpoint as white line. This white line is the midpoint of 2 hour time frame bar and shift of this while line will only occur when
a new high is made which is higher than the last 60 bars or
a new low is made which is lower than the the last 60 bars or
oldest bar that is being discarded was the lowest low of the last 60 bars or
oldest bar that is being discarded was the highest high of the last 60 bars
Price is nothing but a transaction between a buyer and a seller who have a opposite view on current value of scrip that is being traded and have agreed upon a price. A series of such transaction gives rise to price movement. Price moves up till the last buyer has filled his inventory and there are no more buyers willing to transact at that price. This gives us our swing high.
Sellers then auction the price down to invite buyers and price moves down till the last seller has sold his inventory and there are no more sellers willing to sell at that price. This gives us our swing low.
When the buyers are more desperate to act, then we have a scenario where we have a higher swing high and a higher swing low. A series of such higher high / higher low on price gives us our up trend.
On the 3 min chart of nifty, the high of the last 20 bars is plotted with a green line. The low of the same 20 bars is plotted in red. The 50% retracement from the top, is basically the mid point of this 2 lines, which happens to be our KS.
A rising KS signifies a rising bullish sentiment on the a set of 20 bars of 3 min each, meaning we monitor the progress of 60 min time frame using a 3 min chart.
Now same chart, we plot the midpoint of the last 5 bar's high and low, we now have our TS. TS represents the change in sentiment of 15 min tf on my 3 min chart.