Cloud Charts: Trading Success with the Ichimoku Technique [Hardcover]

Cloud Charts - Trading Success with the Ichimoku Technique by David Linton.

David Linton is the CEO of Updata Plc a market data and charting package company. You can view a selection of pages within the book by googleing cloudcharts and go to David Lintons website as this isn't available on Amazon.
Pages 1-117 of this book cover the basic indicators such as Dow Theory, support and resistance, reversals, moving averages, MACD, RSI, seasonality, Fibonacci, point and figure and candlestick. He covers a little about money management when discussing stop-losses but it isn't until you get to page 121 that he begins discuss in any depth the subject of the book Ichimoku / Cloud charts.
Page 120-130 covers how Ichimoku charts are constructed, 131-146 their interpretation, 147-160 the time frames to use Ichimoku in, 161-186 pattern techniques and time frames, 187-202 Linton uses Ichimoku in conjunction with other indicators i.e. moving averages, point and figure etc. From page 202 until the end of the book he discusses back testing strategies and breadth analysis.
I feel this book is an introductory explanation of Ichimoku / Cloud charts. This is a theory book and despite its title gives little indication of much practical success using the techniques outlined in a trading environment. Had the writer traded and shown his success he could have replaced the first half of the book, which discusses basic indicators, with practical examples of Ichimoku's usefulness and accuracy across various markets and instruments.
Would I have bought this book now that I know its contents? Well it does have its weaknesses but the answer has to be, Yes. Is it a reasonable good tutorial on Ichimoku, Yes. But I know some other traders who are a little more hard nosed than I am who would disagree. I must admit here I do have a bias, I'm a great believer in market and trader education, I buy books, read and underline them regularly and use them as a reference, as I will with this book. Paying £30 for a book on indicators is a lot cheaper than entering a trade without knowing about good indicators.
For those who want a good free quick introduction about Ichimoku go to Investopedia and enter Ichimoku also the FXWords web site. For a more in depth explanation google kumotrader and select READ THIS FIRST, its good, some might say as good as this book. To watch a video on how Ichimoku is used in practice go to youtube and search for Ichimoku. I tried to include the web addresses for these references but its against Amazons policy to include them in reviews. I wish you well in your trades.

Cloud Charts - Trading Success with the Ichimoku Technique
by David Linton- reviewed by Larry Lovrencic

My introduction to Ichimoku charts was at the 1997 IFTA conference held in Sydney. During a conversation with Dan Gramza, from Chicago, who teaches the Japanese Candlestick method, and members of the Japanese contingent, Dan steered the discussion to Ichimoku. I thought to myself `What was that? Itchy what? Ah, Ichimoku, that Japanese method steeped in mystique'. Our Japanese colleagues did their best to explain but found it very difficult to do so in a quick informal chat. Intrigued by the encounter, I went off searching for anything I could find about Ichimoku, with little immediate success. Over the years, there have been only a few works which have made their way to English translation and a few written by Western converts.

David Linton, the author of Cloud Charts, had his interest in Ichimoku charts `sparked' during a presentation by Rick Bensignor at the 2004 IFTA conference in Madrid. David had heard of the method prior to the conference but credits Rick with presenting it in an `understable' way. David set out on a quest for Ichimoku knowledge. He researched the internet, questioned Japanese delegates at subsequent IFTA conferences, sought out Rick Bensignor at conferences and meetings and even flew to Tokyo. The fruit of that quest is the book, Cloud Charts.

The Ichimoku method is now fast becoming popular in Western trading rooms and is available on almost all technical analysis software. David must take some credit for turning what seemed to be an exotic and complicated method into an easily understandable and robust trading and analysis tool for non-Japanese speaking technical analysts.

So, what is Ichimoku? The full name of the method is Ichimoku Kinko Hyo which means `at one glance balance bar chart'. Ichimoku charts were devised by Goichi Hosoda , a Tokyo journalist, who believed that once the method was fully understood, one could comprehend the exact state of a market at a glance. Most of the Ichimoku indicators represent equilibrium in one time frame or another and price action is generally analysed with regard to whether the market is in equilibrium, moving away from it or reverting back to it. By their nature, the various indicators also offer dynamic areas of support or resistance.

Cloud Charts is divided into three parts. The first is for the novice technical analyst and is designed to give them an understanding of many basic technical analysis concepts involved with not only Ichimoku analysis but also traditional techniques. More experienced technical analysts may wish to skip this part.

Part two introduces the reader to the basic indicators used in Ichimoku charts (David calls them cloud charts). This section deals with the derivation and interpretation of:
1. The Turning Line (also called the Conversion Line)
2. The Standard Line ( also called the Base Line)
3. The Cloud Span A ( also called the Cloud Span 1)
4. The Cloud Span B (also called the Cloud Span 2)
5. The Lagging Line ( also called the Lagging Span)

Part two offers a guide to applying Ichimoku charts in a multiple time frame sense, as well as the often overlooked Wave Principle, Price Targets and Time Span Principle. However, the application of Ichimoku charts to price and time projection is very subjective and for that reason alone the projections are quite often not utilised by even experienced analysts.

Looking at an Ichimoku chart, it's no surprise that analysts are sometimes turned off by the busyness of the chart. It can look like chaos to the uninitiated but the key to getting past that is understanding the formula to each indicator, how they combine with each other, how they represent a consensus of price action in different time frames and colour-coding. In part two David explains construction and interpretation of the charts in a manner that is easy for any newcomer to technical analysis let alone a professional on a trading desk.

Part three, my favourite part of the book, is where we are encouraged to think outside of the box. Here, the use of Ichimoku charts are combined with other technical analysis techniques, alternative time inputs into the indicators are suggested and the application to market breadth analysis is considered. There is also a chapter on back testing for the quantitative traders to consume.

Overall, this book, in an easily read manner, brings together the body of knowledge of a Japanese technical analysis method which was once thought of as exotic and over-complicated. It has potential to become the definitive English language text on the Ichimoku Kinko Hyo technical analysis method.

Cloud Charts is a very well presented book, and is a great educational tool for the novice as well as the experienced technical investor/analysts.
David Linton`s clear and precise explanation of how Cloud Charts (Ichimoku Technique) have been developed, and the way utilise them in today`s markets is just brilliant.
I would recommend this book to any person wishing to trade securities.

Barry