The Ichimoku Cloud (Ichimoku Kinko Hyo) is a complete trading system developed by Japanese journalist Goichi Hosoda. Unlike most indicators that show one thing, Ichimoku simultaneously shows trend direction, momentum, support and resistance levels, and potential buy/sell signals. It looks complex but follows clear rules.
The Five Components
| Component | Japanese Name | Calculation | What it shows |
|---|---|---|---|
| Tenkan-sen | Conversion Line | (9-period High + Low) ÷ 2 | Short-term momentum |
| Kijun-sen | Base Line | (26-period High + Low) ÷ 2 | Medium-term trend |
| Senkou Span A | Leading Span A | (Tenkan + Kijun) ÷ 2, plotted 26 periods ahead | Future support/resistance |
| Senkou Span B | Leading Span B | (52-period High + Low) ÷ 2, plotted 26 periods ahead | Future support/resistance |
| Chikou Span | Lagging Span | Current close plotted 26 periods back | Confirms trend |
The Cloud (Kumo)
The area between Senkou Span A and Senkou Span B forms the "cloud" (Kumo):
- Price above cloud → Bullish trend
- Price below cloud → Bearish trend
- Price inside cloud → Consolidation / neutral
- Thick cloud → Strong support/resistance ahead
- Thin cloud → Weak support/resistance — easier to break
- Green cloud (Span A above Span B) → Bullish
- Red cloud (Span B above Span A) → Bearish
Ichimoku Buy Signal (TK Cross)
1. Tenkan-sen crosses above Kijun-sen
2. Both lines are above the cloud
3. Price is above the cloud
4. Chikou Span is above price from 26 periods ago
All four conditions = highest probability bullish signal
Cloud Support and Resistance
The Ichimoku Cloud projects 26 candles into the future, giving you advance warning of upcoming support and resistance zones. This is Ichimoku's biggest advantage over other indicators.
Simplified Ichimoku Rules for Beginners
You do not need all five components to start. Begin with these three rules:
- Price above cloud → Only look for long trades
- Tenkan crosses above Kijun → Entry signal
- Kijun-sen → Use as your stop loss level
Ichimoku Settings
Default settings are 9, 26, 52 — designed for 6-day Japanese trading week. For NSE (5-day week), some traders adjust to 7, 22, 44. Either works — stick with defaults to match the majority of market participants.