Incense is an item that attracts Pokemon to your location. It tends to attract more Pokemon to your location. Incense also attracts more Pokemon if you are walking and maintaining a steady speed than if you are stationary.
Generally trainers have found Lure at Pokestops seem to attract more Pokemon. Lures come with the added benefit that the trainer can be stocking up on items periodically at the lured Pokestops. These advantages are particularly noticed when a trainer goes to a location with multiple lured Pokestops.
There are few things that are overlooked with Incense though.
First you can take it with you anywhere while a Lure is stuck in a given location. This provides some massive advantages to you. Given that Incense Pokemon appear from spawn selection of the region you are in you can customize what type of Pokemon you get.
Two major strategies to use while using Incense:
Nest Incense: If you use an Incense an area that has a Nest of Pokemon you are more likely to receive one or more of those special Pokemon while you have an Incense on. To find a nest near you look at the Nest Atlas on SilphRoad.
Super Rare Walk: If you use an Incense in an area with NO Spawns. IE you are in the middle of no where but still have phone service the Incense will pull random Pokemon out of the Global Pokemon table. This means you can get Pokemon that are not common in your area and are possibly super rare. This is a great way to find unique Pokemon. This may be the best way to legitimately catch super rare Pokemon in the game.
Walking is good in general.
Keep in mind that while walking in Pokemon Go you are also earning Pokemon Buddy candies, and also hatching Eggs. Both can add significant value to a walk using Incense as well.
Lets also note that hey Walking is just plain out good for you. Its fun, you get to see new things and its good exercise. So go out buy some Incense find a cool (AND SAFE) place to hunt Pokemon and start walking.
Pokeon Go is always best to me when combined with a real adventure. Hike somewhere that you want to see and catch Pokemon on the way. Make the game an added bonus as opposed to simply the main attraction.
Changes to Incense in the works?
There are some who believe that we could see special types of Incense. This is due to people scouring through the code and finding different types. The thinking is that different types of Incense could attract different types of Pokemon. Some of the types in the code are Spicey which might refer to an incense that attracts Fire type Pokemon.
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