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Ichimoku Cloud

Difficulty beginner

Overview

Ichimoku Kinko Hyo ("equilibrium chart at a glance") is a comprehensive indicator showing support/resistance, trend direction, momentum, and trade signals.

Components

Tenkan-sen (Conversion Line) = (9H + 9L) / 2
Kijun-sen (Base Line) = (26H + 26L) / 2
Senkou Span A (Leading Span A) = (Tenkan + Kijun) / 2, plotted 26 periods ahead
Senkou Span B (Leading Span B) = (52H + 52L) / 2, plotted 26 periods ahead
Chikou Span (Lagging Span) = Close, plotted 26 periods behind

Kumo (Cloud) = Area between Span A and Span B

where: 9H / 9L highest high and lowest low of the last 9 periods · 26H / 26L highest high and lowest low of the last 26 periods · 52H / 52L highest high and lowest low of the last 52 periods · Tenkan-sen fast equilibrium line · Kijun-sen slow equilibrium line · Senkou Span A / B forward-projected cloud boundaries · Chikou Span close shifted backward · Kumo shaded region between the two Senkou spans. does: combines mid-range averages across three lookbacks into a single multi-signal trend system — direction (price vs. cloud), momentum (Tenkan/Kijun cross), forward support/resistance (the cloud's projected position), and confirmation (Chikou clear of historical price). Traders take longs only when price is above a bullish (Span A > Span B) cloud with the Chikou clear of past price, and short the inverse — entries trigger on Tenkan-Kijun crosses, stops sit on the far side of the cloud, and a flip of cloud color or a price-through-cloud break exits the position.

Signals

1. TK Cross

Bullish: Tenkan crosses above Kijun (similar to MA crossover) Bearish: Tenkan crosses below Kijun

Strength depends on position relative to cloud: - Above cloud = Strong bullish - In cloud = Neutral/weak - Below cloud = Strong bearish

2. Cloud Breakout

Bullish: Price breaks above cloud Bearish: Price breaks below cloud

Cloud thickness = strength of support/resistance

3. Chikou Span Confirmation

Bullish: Chikou above price 26 periods ago Bearish: Chikou below price 26 periods ago

4. Cloud Color

Bullish Cloud: Span A > Span B (typically green) Bearish Cloud: Span A < Span B (typically red)

Practical Guidelines

  1. Best in Trending Markets — Generates false signals in ranges
  2. Cloud is S/R — Price tends to bounce at cloud edges
  3. Thick Cloud = Strong S/R — Thin clouds break easily
  4. All 5 Components — For full signal, check all components
  5. Works on All Timeframes — But best on daily and above

Next Steps