This is the clearest plain-English walkthrough of what the five Ichimoku lines actually mean and how to read a cloud chart. The trading plan built on top of them is backtested on eight to eleven trades of one currency pair, then tuned to those same trades until the numbers looked better.
The one idea
Ichimoku Kinko Hyo is a five-line system plotted directly on price: Tenkan Sen (a 9-period high/low average), Kijun Sen (a 26-period high/low average), Chikou Span (today's close plotted 26 periods in the past), and Senkou Span A and B, whose gap forms the 'Kumo' cloud projected 26 periods into the future. Patel's argument is that these five lines, read together, tell you trend direction, momentum, and support/resistance in one glance, and that traders who cherry-pick two or three of the lines and ignore the rest are the ones who give up on the system.
The book's real contribution is turning that description into an actual checklist: price above or below the cloud sets current bias, Tenkan versus Kijun sets short-term direction, the Chikou Span's distance from historical price measures whether momentum has 'open space' to run, and the future cloud's shape (thin and sloped versus thick and flat) previews how strong or choppy the next stretch is likely to be.
From there Patel builds one specific bullish/bearish trading plan around EURUSD: enter only when all five components agree, cap entry distance from the Tenkan and Kijun lines, use a fixed pip buffer, and never risk more than 20 percent of the account across a maximum of four currency pairs at a time.
What it actually teaches
The book's plan is not really a numbered sequence, it is a stack of five components that all have to agree before Patel enters a trade.
PLOT THE FIVE LINES
Tenkan Sen = (9-period highest high + lowest low) / 2. Kijun Sen = (26-period highest high + lowest low) / 2. Chikou Span = today's closing price plotted 26 periods back. Senkou Span A = (Tenkan + Kijun) / 2, shifted forward 26 periods. Senkou Span B = (52-period highest high + lowest low) / 2, shifted forward 26 periods. Senkou A and B form the Kumo cloud; yellow when A is above B (bullish), red when A is below B (bearish).
CONFIRM EVERY LINE AGREES
For a bullish entry: price must be above the Kumo cloud, Tenkan Sen above Kijun Sen, the Chikou Span sitting in 'open space' above price from 26 periods ago with no historical price nearby to stall it, and the future cloud itself bullish (Senkou A above Senkou B, both sloping up). If any one of the five disagrees, Patel's rule is to wait, not trade.
CAP THE ENTRY DISTANCE AND SET THE BUFFER
Entry price has to sit within 200 pips of the Tenkan Sen and within 300 pips of the Kijun Sen; if price has run further than that, the plan says wait for it to 'equalize.' The entry buffer is 40 pips on the bullish side and 35 pips on the bearish side, and no position uses margin or adds to a position once it is on.
TRAIL THE STOP AS PROFIT BUILDS
Once profit reaches 300 pips (250 on the bearish side), the stop moves to the Tenkan Sen plus a buffer instead of a fixed distance. Stops are re-adjusted daily and alerts are reset weekly if untriggered, since the plan calls for no discretionary decisions once it is running.
What it looks like Monday morning
A reader who finishes this book can, for the first time, actually explain what Tenkan Sen, Kijun Sen, Chikou Span, and the two Senkou spans measure and why they are plotted the way they are, instead of just recognizing a cloud shape on a chart. That is a real, usable outcome for anyone who has been staring at Ichimoku indicators without understanding the math behind them.
What a reader should not do is copy the specific entry plan (200/300-pip distance caps, 40/35-pip buffers, 300/250-pip stop triggers) onto a live account. Those numbers were fit to eight to eleven EURUSD trades from January 2007 to January 2009 and re-tuned against that same handful of trades across four separate revisions in chapter 4. The honest Monday-morning move is to build the five-line checklist into your own charting platform, then backtest your own rule set across many instruments and years before risking money on it.
| Trading plan version | Trades | Risk/reward ratio | Note |
|---|---|---|---|
| Original plan (Table 4.1) | 8 | 1.51 | One loss of -315 pips broke the plan's own 300-pip cap |
| Entry buffer added to 300-pip rule (Table 4.3) | 8 | 0.88 | The bad loss is excluded by rule change, not traded around |
| 300-pip Kijun distance rule removed entirely (Table 4.4) | 11 | 1.82 | More trades enter, but risk grows faster than reward |
| Max entry risk capped at 250 pips (Table 4.5) | 11 | 1.19 | Risk capped after the fact, on the same 11 trades |
| 550-pip profit exit added, not re-backtested (Table 4.7) | 11 | 0.88 | Author calls this result an estimate, 'not 100 percent accurate' |
All five versions are fit to the same 8 to 11 EURUSD trades from January 2007 to January 2009; none is verified against a separate period or instrument.
Believe it or not, the winning percentage really does not matter.Manesh Patel, Trading with Ichimoku Clouds
Where it fails
- The entire backtest is eight to eleven trades on one currency pair. Chapters 3 and 4 backtest the 'ideal' strategy on EURUSD from January 2007 to January 2009 and get exactly eight trades. The author then revises the rule set four separate times (Tables 4.1, 4.3, 4.4, 4.5, 4.7) against that same small trade set, watching the risk/reward ratio move from 1.51 to 0.88 to 1.82 to 1.19 to 0.88 as rules are added and removed. This is textbook in-sample curve-fitting: every version is tuned to the trades it is trying to predict, and none is ever tested on a holdout period, a second instrument, or a different date range, despite the book's own claim that Ichimoku 'works for all instruments.'
- The final version isn't even fully backtested. The last iteration in chapter 4, which adds a rule to exit at a 550-pip profit, is explicitly not re-run through the historical data. Patel writes: 'Instead of backtesting everything again with the new rules, we are going to estimate the results... This is not 100 percent accurate.' The risk/reward number the chapter ends on (0.88) is an estimate on top of an eight-trade sample, not a verified result.
- The day-trading chapter's 'backtest' is six hand-picked trades from two days. Chapter 8 tests the 5-minute plan on exactly two trading days, November 16 and 17, 2009, producing six total trades. The author states outright that after finding two winners on the first day he went looking for a second day specifically 'to find some losses and examine them.' That is example selection, not a systematic historical test of the strategy.
- The period settings (9, 26, 52) are inherited, not tested. Patel states plainly that he has never experimented with alternative periods for any of the five Ichimoku formulas and does not plan to: 'I have not experimented with other period values for any of the Ichimoku indicators as others have done so already. I do not plan to do so in the future either.' The 9/26/52 values trace back to Japanese trading calendars from the era Ichimoku was invented; the book offers no evidence they are still the right fit for modern FX volatility or for markets outside currencies.
- The book admits its own trading plan is unfinished. The chapter 4 conclusion states the 'foundation strategy' developed across the whole backtesting section 'only captures 40 percent to 50 percent of the max profit,' and lists chart patterns, multi-time-frame analysis, entry strategies, and advanced money management as techniques the author defers to unwritten 'future books.' A reader buying this book for a complete, tested trading plan is buying half of one.
Who it is for
Buy it if
You want the clearest, plainest explanation available of what the five Ichimoku lines mean and how to read a Kumo cloud chart, and you plan to design and backtest your own rule set rather than trade the book's plan as delivered.
Skip it if
You want a validated system with a real sample size, or you are looking for a book that tests across multiple instruments, regimes, and time periods before asking you to risk capital on the result. The trading plan chapters will disappoint you.
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