By David Linton

A book review by Muhammad Altamash of the AIM & PLUS Newsletter

If you've ever been to Master Investor you are sure to have noticed David Linton. The founder and CEO of trading software specialist Updata spends a large part of the day surrounded by investors eager to build on their understanding of spotting trends and trading opportunities by studying charts.

In between his numerous television appearances and the small matter of running his own company Mr Linton, who also edits www.T1pstracker.com , has managed to squeeze out the time to author Cloud Charts: Trading Success with the Ichimoku (one look) Technique. The Ichimoku Technique refers to the method created by Japanese journalist Goichi Hosoda who after many years of painstaking research penned a seven-volume tome on the method. In Cloud Charts, Linton brings the method to life with a host of colourful diagrams, useful pointers and guidelines to show how the system can help enrich a trader's ability to make money from the markets.

After a very useful summary of the basics and main techniques of technical analysis, Linton moves onto the focus of the book which is understanding the construction and analysis of Cloud Charts. So what is a Cloud Chart? Well, as the name suggests, it's a system that helps traders identify price trends through the use of blocks of colour (clouds). Between and on the edges of these clouds are the following five types of lines whose interaction gives signals of how prices are likely to move:

- The Turning Line which represents the midpoint of the high and low of the last 9 days.

- The Standard Line that tracks the midpoint of the high and low of the previous 26 days.

- Cloud Span A is the midpoint of the turning line and standard line shifted 26 bars forward.

- Cloud Span B represents the midpoint of the high and low of the last 52 days shifted 26 bars forward.

- Lagging Line which tracks closing prices that are shifted back by 26 bars.

Cloud Span A and Cloud Span B behave just like moving averages and if the shorter term span A is above the longer term span B (i.e. prices are rising faster in the short term than in the long term) this is seen as a bullish trend with the area between these two spans being shaded blue. On the other hand a bearish trend (where prices are falling relatively faster in the short term than the long term) is coloured in red on the chart. It is these colour-coded areas that present the biggest advantage of cloud charts as they immediately give you an idea of the prevailing trend. The basic idea underpinning the technique is that prices above the cloud are bullish while prices below the cloud are bearish. The interaction between the price, lagging line and edges of the clouds confirm support and resistance levels and generally the most important signals are delivered by the lagging line's movement along the cloud.

Aside from the instant recognition of trends another advantage of Cloud Charts is the ease with which investors can analyse price movements along different time horizons. Furthermore the display prioritises the development of trends (which are projected weeks forward) rather than the tops and bottoms on ordinary charts and so it prevents one from indulging in the familiar frustration of dwelling too long on missed opportunities.

While Cloud Charts definitely offers a much more attractive way of looking at charts, investors who favour technical analysis will also wonder if the technique can help them avoid being sucked into false moves. While the colour coded areas present a likely path for future prices, the true value of the technique can only be realised if the signals and indicators present more reliable indications of reversals or continuations of trends. Now most investors will already have their tried and tested means of making money from trading but if Cloud Charts are something you're interested in I would recommend first taking a look at the abridged copy of the book available on http://www.cloudcharts.com .

The taster on the website will give you a very quick overview of the range of indicators, its use alongside other TA techniques and of course a better idea of whether Cloud Charts fit with your trading objectives and style. If this appeals to you I would suggest downloading the software and doing your own back testing before ditching your own style of trading.

But all in all, Linton's book is a very worthy introduction into both the basics of Technical Analysis for beginners as well as the ins and outs of Cloud Charting techniques for those interested in the system.

Cloud Charts by David Linton can be purchased for GBP 29.99 by clicking here.

Visit www.SquareMileBookstore.com for the ultimate range of investment, trading and business books, personally selected by investment experts, with exclusive free reviews from some of the UK's foremost investment writers.