Ichimoku Cloud
Overview
The Ichimoku Kinko Hyo (Ichimoku Cloud) is a comprehensive indicator system that defines support and resistance, identifies trend direction, gauges momentum, and generates trading signals — all in a single glance. Developed by Goichi Hosoda, the system consists of five lines and a shaded cloud (Kumo) that projects into the future, providing a uniquely forward-looking view of market equilibrium.
Key Concepts
Tenkan-sen (Conversion Line): 9-period midpoint — short-term momentum. Kijun-sen (Base Line): 26-period midpoint — medium-term trend. Senkou Span A & B: form the Kumo (cloud) projected 26 periods ahead. Chikou Span (Lagging Span): current close plotted 26 periods back. Cloud thickness indicates support/resistance strength. Cloud colour indicates trend direction.
Entry Signals
Enter long when price crosses above the Kumo cloud with both spans supporting bullish structure. Buy on a Tenkan-Kijun cross (TK cross) above the cloud for a strong bullish signal. Look for Chikou Span to be above price and above the cloud for full bullish confirmation. Enter on a Kumo twist (Senkou A crosses above Senkou B) with price above the cloud.
Exit Signals
Exit longs when price closes below the Kijun-sen on a sustained basis. Close positions when a bearish TK cross occurs below the cloud. Take profits if the Kumo cloud ahead flattens or thins, suggesting reduced momentum. Exit when the Chikou Span crosses below price from above.
Best Timeframes
1H, 4H, Daily, Weekly
Pro Tips
The strongest Ichimoku signals occur when all five elements align in one direction — this is rare but extremely reliable. Many traders only use price relative to the cloud and the TK cross; mastering the Chikou Span and Kumo twist adds a significant edge. Ichimoku was designed for the daily timeframe; using original settings (9, 26, 52) on lower timeframes may require adjustment.
More Topics in This Category
Parabolic SAR
The Parabolic Stop and Reverse (SAR) is a trend-following indicator that plots dots above or below price to define the current trend direction and provide trailing stop levels. Developed by J. Welles Wilder, the indicator accelerates toward price as the trend matures, eventually crossing price to signal a reversal. The parabolic curve of the dots gives the indicator its name.
Rate of Change (ROC)
Rate of Change is a pure momentum oscillator that measures the percentage change in price over a specified number of periods. It oscillates around a zero line, with positive values indicating upward momentum and negative values indicating downward momentum. ROC is useful for identifying momentum shifts, overbought/oversold conditions, and divergences that precede price reversals.
Stochastic RSI
The Stochastic RSI applies the stochastic oscillator formula to RSI values rather than raw price data, creating a more sensitive momentum indicator that oscillates between zero and one. By measuring where the current RSI sits relative to its own range over a lookback period, the Stochastic RSI generates faster overbought and oversold signals than either the stochastic or RSI alone, making it particularly useful for timing entries within established trends.
Average True Range (ATR)
Average True Range measures market volatility by calculating the average range of price movement over a specified period, accounting for gaps. Developed by J. Welles Wilder, ATR does not indicate direction — it quantifies how much an asset typically moves, making it essential for position sizing, stop-loss placement, and volatility-based trade management. Rising ATR indicates increasing volatility; falling ATR signals contracting volatility.