What is the Ichimoku Cloud?

The Ichimoku Cloud is a technical analysis system that combines trend, momentum, support, and resistance information on a single chart. It consists of five components:

1. Tenkan-sen (Conversion Line): Shorter-term price midpoint.
2. Kijun-sen (Base Line): Longer-term price midpoint.
3. Senkou Span A: One boundary of the cloud.
4. Senkou Span B: The other boundary of the cloud.
5. Chikou Span (Lagging Span): Closing price plotted backward.

The area between “Senkou Span A” and “Senkou Span B” forms the Kumo or cloud.

How to Use the Ichimoku Cloud

To execute an Ichimoku cloud trading strategy, commonly examine the price relative to the cloud:

• Price Above the Cloud: Upward trend conditions.
• Price Below the Cloud: Downward trend conditions.
• Price Inside the Cloud: Indeterminate or transitional conditions.

The Tenkan-sen and Kijun-sen can also be compared to assess momentum and potential trend changes. However, Ichimoku should not be treated as a guaranteed forecasting system. Its signals can produce different results across markets and time frames.

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