Ichimoku Cloud

What Is the Ichimoku Cloud?

Ichimoku Kinko Hyo, meaning "one-glance equilibrium chart," was developed by Goichi Hosoda. It 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."

Reading the Cloud

Price above the cloud is bullish. Below is bearish. Inside the cloud is neutral/transitioning. The cloud itself acts as dynamic support and resistance. A thick cloud is harder to break through than a thin one. When Senkou Span A is above Senkou Span B, the cloud is bullish (typically shaded green). When below, bearish (red). The cloud is plotted 26 periods ahead, giving you a visual preview of future support/resistance zones.

Trading Signals

The strongest Ichimoku signals occur when multiple elements align: price above the cloud, Tenkan above Kijun, Chikou Span above price from 26 periods ago, and a bullish (green) cloud ahead. This is called a "five-line bullish" setup. The Tenkan/Kijun crossover (similar to a Moving Average crossover) provides entry timing. Ichimoku works best on daily and weekly charts for pairs like USD/JPY, where it is extensively used by Japanese institutional traders.