Charting  |  SEP 2007

Ichimoku Kinko Hyo Charts by Nicole Elliott

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.

by Nicole Elliott