Ichimoku Cloud

What is the Ichimoku Cloud?

The Ichimoku Cloud, or Ichimoku Kinko Hyo, is a technical indicator that plots five lines on one chart: two high-low range midpoints (Tenkan-sen and Kijun-sen), two spans projected 26 bars ahead that form the cloud (Senkou Span A and B), and the close shifted 26 bars back (Chikou Span). Price position against the cloud and the lines sets its trend conditions.

Each line has its own calculation and plot position. Tenkan and Kijun mark the midpoints of the 9-bar and 26-bar ranges, Span A and Span B form the cloud, and Chikou shifts the close back 26 bars to compare it with past price.

How is the Ichimoku Cloud calculated?

Tenkan = (highest high + lowest low) / 2 over 9 bars. Kijun uses the same calculation over 26 bars.

Span A = (Tenkan + Kijun) / 2. Span B is the high-low midpoint over 52 bars. Plot both spans 26 bars ahead.

Chikou is the current close plotted 26 bars back. It is a close, while Span A is an average of two midpoints and the other three calculated lines are range midpoints.

Current cloud vs forward cloud: timing each signal

At bar t, compare the close with cloud values plotted at t. Those span values were calculated at t − 26.

New spans calculated at t plot at t + 26. Their order reads the trend now: Span A above Span B is a bullish cloud, and a cross between the spans is an early sign of a turn.

The close calculated at t plots as Chikou at t − 26. The trader learns that close at t, so a Chikou signal belongs to bar t, where the trade happens.

Ichimoku Cloud example

The 9-bar high and low of $52 and $48 give Tenkan $50. The 26-bar high and low of $52 and $44 give Kijun $48. Span A is therefore $49. The 52-bar high and low of $52 and $42 give Span B $47.

Those new spans plot 26 bars ahead. The $51 close trades against the cloud under the current bar, $46 and $45, and clears both spans. Tenkan above Kijun adds the momentum condition.

Chikou plots the $51 close 26 bars back. A Chikou above the price at that earlier bar confirms the long read; a Chikou inside that old price action says the trend lacks follow-through.

How to trade the Ichimoku Cloud

One long setup requires the close above the current cloud and Tenkan above Kijun. Chikou above the price 26 bars back adds a third confirmation.

Measure cloud thickness as the absolute distance between its aligned spans; a thick cloud is firmer support than a thin one. Set entry, stop, size and exit from a level on the chart, such as the Kijun or the cloud’s edge.

The chart’s full-history example ends with a $53.50 close and Tenkan at $50.25. Its current cloud runs from $42.47 to $41.07, and the new forward spans are $49.27 and $47.24.

With price above the cloud, call buyers paying the ask in Options Flow confirm the long read, and the Options Profit Calculator shows the position’s loss at the Kijun and its payoff at your target.

Limitations of the Ichimoku Cloud

• The cloud lags. The $46 and $45 spans under the current bar were calculated 26 bars earlier, so by the time the $51 close clears them, price has already made the move. The $48 Kijun sits closer to price than the cloud’s $46 edge, so it gives the tighter stop.
• The forward cloud is today’s trend drawn ahead. Span A at $49 over Span B at $47 makes it a bullish cloud, and those two values become the zone price meets 26 bars from now, wherever price has gone by then.
• The 9, 26 and 52 settings are defaults. Retune them for another interval or market, and every line built from a changed setting moves with it.
• In a sideways market, price moves in and out of a thin cloud and the lines cross often, so the conditions can conflict. Stand aside until a close clears the cloud.
• Five lines allow many rule combinations. Write the full rule before the trade, and match the 26-bar shift before you compare two platforms’ clouds.

Bottom line

The Ichimoku Cloud reads trend, momentum and support on one chart, with price against the cloud as its central condition. Trade the close against the cloud under the current bar, confirm with Tenkan over Kijun and Chikou above past price, and write the full rule before the trade.