This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
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January 17th, 2008 at 10:47 pm
It hurts my eyes……….lol
January 18th, 2008 at 7:18 am
lol
January 18th, 2008 at 9:13 pm
looks like you may be an IRT user, so you may already have seen this:
http://www.linnsoft.com/charts/index.html
take care and have a great weekend -
derek
January 18th, 2008 at 9:55 pm
thanks derek…that’s where i originally saw the idea…i started looking around to see what it was about…i do like the kumo clouds, and will probably incorporate them into any setup i use
john
January 19th, 2008 at 10:26 am
I was thinking about the kumo clouds, but was always unnerved about taking plays when price had moved above or below the clouds, but against the indicated direction of the trend. I feel the same way about Ichimoku. To circumvent this fear, I thought about deriving a histogram-type indicator from the kumo, which would move above and below a zero line and change color depending on volatility. This would keep my charts “clean”. This would decontextualize the signal and make it easier to evaluate more “objectively”. When price is so far above or below the cloud, it’s hard to trust the signal to trade in the other direction, but from what I’ve observed this is often when the reward is greatest. You would just need to look at volatility more carefully when determining risk for each trade.
Because I mostly trade currencies, I would need only two colors on the histogram — indicating trade (green?) and no-trade (red?), depending on volatility and price in relation to the cloud. Combined with an oscillator (not more than one, I would say) and a simple pattern filter (candle reversals, 1-2-3 hooks, or whatever), this could be a robust algorithm. I personally wouldn’t trade it on anything less than thirty-minute bars or candles, although Kijun at 55 and above (from Ichimoku Kinko Huo) works very well on 15min charts. (I used only the Kijun line for awhile, back when I first started trading.) Even on 30min charts, my feeling is you’re likely to get a lot more noise than any derived models can profitably handle. But I’m looking, as I said, at currencies. I don’t know about how this would work with ES, YM or another instrument with more market depth and better internal indicators, but I imagine such indicators would help immensely as confirmation.
Maybe this kind of indicator could be coded into your charting package. I dunno. I am trying to find it for NeoTicker and so far it’s a no-go. (My coding ability is limited to smiley face emoticons.)
Looking forward to seeing more.
January 19th, 2008 at 11:21 am
jay: thanks for the information…i was hoping someone would comment who has actually tried it, and give me there experience…from the little information i was able to find, its almost like a cult or something…this is all u need to become rich…u don’t need any other indicators…so basically, i’m trying to get a thorough understanding of what the system contains, and take away from it anything i find useful
i’m new to the whole IKH phenomenon…i made the kumo clouds hollow, so my chart is cleaner…i put a signal marker to identify the crosses…its seems that the cross is nothing more than a moving average crossover with the exception of how it is calculated…so i doubt that could be used profitably in itself…it uses the averge of each bar instead of the close…that’s something i used to do anyway with my moving averages…especially on small time frames, i don’t think any one point carries much significance…so i agree with them there
i also think the kumo cloud does a good job of identifying a general area of support/resistance…so a small break on one side or the other could/should be faded when everything else lines up to fade the move…i don’t subscribe to just trend trading…that may be a mistake in the long run, but i don’t buy into the general philosophy that its the only way to trade…however, i do have a couple of methods to keep me in trades longer…basically riding a small trend that may very well turn into a larger one…even when i’m on the right side of the trend, the hardest thing to do is ride it out without the quick exit…TREND TRADERS ARE THE TRUE CONTRARIANS!!! riding a trend to its completion without getting shaken out has to be the hardest task in trading…its not natural, but its surely profitable
i removed the chinkou span…that may work better on larger time frames, but for intra-day trading, i found it distracting
i may be mistaken with what i’m about to say here, but this is how i think…the chart’s name is translated into english as “equilibrium at a glance.” so i’m thinking that you could trade on reversion to the mean (kumo clouds)…i’m not exactly sure if i’m using the correct terminology or not…the kumo may not be the mean, but its an area of support/resistance, and it seems that price is often drawn to areas of support and resistance on a continual basis using any chart setup…if the market is experiencing a trend day, the kumo cloud should make that apparent..in that case, playing the oppositie side is probably a bad idea…i mainly like it because it seems to do a good job of keeping track of a general area of where sellers/buyers were before…it just does it in an easier way
when the clouds narrow, they say that is a sign of low volatility…i like that feature…playing a break to one side of a narrow cloud while being confirmed with a cross in the same direction can sometimes lead to a huge trending move…not always for sure…however, it shows the low volatility, and if it expands, u want to ride that trend
in a nutshell, i think its simply a moving average crossover system…however, the kumo clouds (to me) are the unique feature of the idea…the chikou span is interesting, but i can’t, for the life of me, make any sense out of that in real-time…that may be because of my charting package, but who knows…i tried to code a paintbar identifying that, and it took forever to even get it close…my coding is shit! the only reason i can barely do it is because Investor R/T makes it simple enough, a monkey could do it
IMO, this is just a small piece of the puzzle…i’m in the process of going back over almost every indicator that i ever fell in love with for another look…i’m looking at each one in the context of what its supposed to be telling me…most of the indicators i use from blau’s book can be used as markers, and i don’t need to see the actual lines or oscillators…so, that is freeing up some space…i’m trying to get a combination of indicators to quickly tell me whether the market is trending, turning, flat, or if momentum is the dominant theme…so, i’m basically looking for the holy grail (sarcasm alert)…seriously, i think the kumo clouds by themselves are great, and i imagine they stick around for awhile…i even added CCI back into the mix to help identify extremes (fade), and pullbacks in a trending market…i almost hate putting that on there, because i don’t want to be lumped in with Woodie, but i have always liked the indicator…in that video i made, i didn’t use the signal markers for TSI, TDI, RSI, STOH, MACD, blah, blah, blah…i think the only three i have on my charts now are the TSI, MDI, and IWA
i have noticed that there is very little information on IKH…if i was a better writer, i would quickly get a book to print…i’m sure i could put some BS together :-)
hope you’re enjoying MALI…i’ve been in AL all week, don’t be jealous!
January 19th, 2008 at 4:24 pm
WRT the comment about the kumo being useful for fading extremes back to the mean, this is exactly what some people do with moving averages as well. (I use something similar to this approach in my main swing trading model, and I’m currently trying to automate it.) Although some might call this a range trading approach, most traders only fade the extremes in the direction of the prevailing trend to increase their odds — until they get a trend reversal signal, often presaged by some kind of divergence. And I think this is really just another way of trading with the trend — essentially, they are just trading pullbacks from statistical/deviation extremes. There was some interesting research done on the moving average which probably applies to any fade-to-mean effort. It’s not directly related to what I just wrote, but it lays out a basic framework for understanding price in relation to moving averages. I’m trying to find the link….
You would of course have to select the right instruments for the approach you hinted at above. And when talking about the trend, we have to be careful — about time frames in particular. Another important piece of information in trying to decide if kumo clouds are for you is how they behave statistically. I approach this question by looking at the statistical runs of different behaviors — for instance higher highs, lower lows, maximum favorable and adverse excursions, etc. But don’t take my word for it because I’m just a hack. Check out this post by a pretty smart dude on teh NeoTicker forums:
http://newsletter.neoticker.com/?p=227
Holy crap. I just found the link for the moving average study:
http://newsletter.neoticker.com/?p=26
Okay, I hope this helps. There is all kinds of different ways I’ve learned to look at price because of Lawrence Chan. He’s helped me so much, in fact, that I bought both NeoTicker and Grid Optimizer. And I’m still learning how to use it after one year. LOL! I told ya I was dumb.
January 19th, 2008 at 5:03 pm
jay: thanks for the links…it looks like i have something else to learn in my quest for riches…to the list of programming, backtesting, some japanese, i can now add statistics to the long list…i may have to hold off on that yacht purchase
i’m anxious to check this stuff out…i’ve heard u mention lawrence chan before
January 19th, 2008 at 5:07 pm
ok, i just briefly looked through those articles, and i’ve bookmarked them…quite interesting indeed!
January 19th, 2008 at 5:10 pm
jay: that is one heck of an interesting blog…that will make it to the top of my must read list…WOW!
January 19th, 2008 at 5:48 pm
Yep. He’s a very bright guy and there are some other interesting “folks” there too. Lots of food for chewing on.
January 19th, 2008 at 10:12 pm
[...] now MWF is interested in them, so I spent some time today taking a closer look. It turns out, the two main lines are midpoints [...]
January 22nd, 2008 at 11:08 pm
Damnit I should be sober when trying to read all this…
kinky.. kumo.. clouds… blargifu! :)
E.