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[ReboundMan]

I had responded earlier to a post from a fellow "newbie" who was trading equities and felt that the Ichimoku Kinko Hyo system was signaling entry points into a trade when it was extended. I, too, had had that concern so I conducted a comparative analysis on some personal equity positions to determine if the Ichimoku system was equivalent to or superior to the Western trading techniques involved in "4-Stage Analysis" which is used by many equity hedge fund managers. I had just completed a several-week long course presented by a former hedge fund manager whose trading system utilizes the 4-Stage Analysis system along with other determining indicators and oscillators.

The beginning of the 2nd Stage in the 4-Stage system is signified by the crossing of the 200-day SMA over the 150-day SMA.

I am happy to report that almost without exception the Ichimoku Kinko Hyo system signaled multiple entry points for profitable trades before the 4-Stage Analysis signaled the first one. The time frame I chose dates back to the March 2009 lows so that all market conditions were equal for the comparative analysis of the two systems. I have attached the equity charts as .zip files to this post for individual perusal.

I hope the attached research helps provides some answers to a few questions. Just yesterday I received my copy of Manesh's book and look forward to learning more about the Ichimoku Kinko Hyo trading system.

[Sandew]

@ ReboundMan
A better comparison would be between Ichimoku performance vs. the first and third and fourth stages of 4-Stage system. Can you please share your experience on the other stages as well.
Thank you for posting comparison with the second stage.

[Gekko]

<ReboundMan>, I don't know where you got your 4-stage analysis from but it certainly looks very simplistic. My trading system is based on 4-stage analysis, which - I'm afraid - is a bit more complicated than a cross of two moving averages, and looking at the stocks you analyzed my system flashed an entry signal about a month ahead of IKH. Which kind of shows what I already knew: IKH is slow.

[ReboundMan]

Thanks for the feedback.

I conducted the "simplistic" comparative analysis on the 2nd Stage vs. Ichimoku entry points because the version of the 4-Stage analysis I received instruction did not allow entries into the 1st stage as it is the most volatile and has the highest risk for losses. The 3rd stage is the "topping-out" stage and the 4th stage is the decline where shorting a stock may be in order. When I conducted the analysis in the March timeframe we were in Stage 2 for most equity instruments.

Since I conducted the analysis I have received Manesh's book and am working through it to understand and paper-trade the strategies outlined in the later chapters. Based on what I have read and in regarding "slow" entries it all depends on each individual's desired risk-reward ratio. Each trader has his own risk tolerance and can modify the Ichimoku Kinko Hyo trading plan to fit his/her own characteristics.

[sunman4008]

Hello,

That is correct.   The trading plan should fit "your style".    This is why there is no ideal trading plan at all.   The trading plan in the book is the foundation trading plan.   If you take that and then backtest it, you will get some foundation results.   After analyzing those results and things that you learned in the backtest, you will learn how to optimize the trading plan.     After awhile, your trading plan will be optimized to a point, you will feel comfortable to start to trade with with mini-lots and eventually into larger positions.


-Manesh