Quantitative Analysis of Ichimoku Senkou Span Cross Strategy: A Case Study of an Unsuccessful Trade
The Black Book of Day Trading Strategies
1,000 complete strategies · 31 chapters · Full trade plans
This article presents a detailed case study of an unsuccessful trade using the Ichimoku Senkou Span Cross Strategy. We will analyze the reasons for the trade's failure and extract valuable lessons that can be applied to future trading decisions.
Mathematical Formulation of the Senkou Spans
The Ichimoku Kinko Hyo system is composed of five primary lines, but the Senkou Span Cross strategy focuses on the interaction between Senkou Span A and Senkou Span B. These two lines form the “Kumo” or “Cloud,” a region of dynamic support and resistance.
Senkou Span A is calculated as the average of the Tenkan-sen and Kijun-sen, plotted 26 periods ahead:
Senkou Span A = (Tenkan-sen + Kijun-sen) / 2
Senkou Span A = (Tenkan-sen + Kijun-sen) / 2
Where:
- Tenkan-sen = (Highest High of the last 9 periods + Lowest Low of the last 9 periods) / 2
- Kijun-sen = (Highest High of the last 26 periods + Lowest Low of the last 26 periods) / 2
Senkou Span B is calculated as the average of the highest high and lowest low over the past 52 periods, also plotted 26 periods ahead:
Senkou Span B = (Highest High of the last 52 periods + Lowest Low of the last 52 periods) / 2
Senkou Span B = (Highest High of the last 52 periods + Lowest Low of the last 52 periods) / 2
Data Analysis
| Trade Parameter | Value |
|---|---|
| Asset | PTON |
| Entry Date | 2023-02-01 |
| Entry Price | $15.00 |
| Exit Date | 2023-03-01 |
| Exit Price | $12.00 |
| Return | -20% |
Trade Example
Let's consider a specific trade example. On a daily chart, a bullish Senkou Span cross occurred. The relevant price levels at the time of the cross were as follows:
- Entry Price: $100.00
- Stop-Loss: $95.00 (placed below the Kijun-sen)
- Initial Target: $110.00 (based on a previous resistance level)
The trade was initiated at $100.00. The price subsequently rallied to a high of $115.00 over the next few weeks, at which point a trailing stop was triggered at $112.50, resulting in a profit of $12.50 per share.
Conclusion
This article has provided a quantitative examination of the Ichimoku Senkou Span Cross Strategy, with a specific focus on a case study of an unsuccessful trade. By understanding the nuances of this effective tool, institutional traders can enhance their ability to identify and capitalize on market trends.