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Ichimoku Cloud

The Ichimoku Cloud (Ichimoku Kinko Hyo) is a comprehensive indicator that defines support and resistance, identifies trend direction, gauges momentum, and provides trading signals — all in one view. Originally developed by Japanese journalist Goichi Hosoda, it uses five lines and a shaded 'cloud' to give traders a complete picture of price action at a glance.

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How Ichimoku Cloud Works

Ichimoku consists of five lines: Tenkan-sen (conversion line, 9-period midpoint), Kijun-sen (base line, 26-period midpoint), Senkou Span A (average of Tenkan and Kijun, plotted 26 periods ahead), Senkou Span B (52-period midpoint, plotted 26 periods ahead), and Chikou Span (current close plotted 26 periods back). The area between Senkou Span A and B forms the 'cloud' (Kumo).

Key Features

Tenkan-sen (Conversion Line) — 9-period high+low midpoint

Kijun-sen (Base Line) — 26-period high+low midpoint

Senkou Span A — midpoint of Tenkan and Kijun, projected 26 periods forward

Senkou Span B — 52-period midpoint, projected 26 periods forward

Kumo (Cloud) — shaded area between Senkou Span A and B

Trading Signals

→Price above the cloud — bullish trend
→Price below the cloud — bearish trend
→Price inside the cloud — consolidation or transition
→Tenkan crossing above Kijun — bullish signal (stronger above cloud)
→Cloud twist (Senkou A crosses Senkou B) — potential trend change

Best Used For

✓Identifying trend direction and strength at a glance

✓Finding dynamic support and resistance zones

✓Filtering trades — only take longs above cloud, shorts below

✓Spotting trend reversals via cloud twists and crossovers

Limitations to Consider

⚠Can look complex and intimidating on a chart
⚠Less effective in choppy, range-bound markets
⚠Lagging — based on historical midpoints, not predictive
⚠Default settings (9, 26, 52) were designed for 6-day trading weeks and may need adjustment

Ichimoku Cloud FAQs

Common questions about ichimoku cloud

When Senkou Span A is above Senkou Span B, the cloud is typically green (bullish). When Span A is below Span B, the cloud is red (bearish). A thicker cloud indicates stronger support or resistance.

It can seem overwhelming at first because there are five lines. Start by focusing on just the cloud: is price above it (bullish) or below it (bearish)? Then gradually learn the crossover signals. The cloud alone provides valuable trend and support/resistance information.

Ichimoku works on any timeframe but is most popular on daily and weekly charts for swing trading. Day traders use it on 1-hour and 4-hour charts. The default settings (9, 26, 52) are most widely tested on daily charts.

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Disclaimer: Charted provides technical analysis for educational purposes only. This is not financial advice. All trading involves risk. Always consult a licensed financial professional before making investment decisions.

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