Ichimoku

Overview

The Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a versatile indicator that defines support and resistance, identifies trend direction, gauges momentum, and provides trading signals.

Calculation

The Ichimoku Cloud is comprised of five lines:

  • Tenkan-sen (Conversion Line): (9-period high + 9-period low)/2

  • Kijun-sen (Base Line): (26-period high + 26-period low)/2

  • Senkou Span A (Leading Span A): (Conversion Line + Base Line)/2, plotted 26 periods ahead

  • Senkou Span B (Leading Span B): (52-period high + 52-period low)/2, plotted 26 periods ahead

  • Chikou Span (Lagging Span): Close plotted 26 periods behind

The space between Senkou Span A and B is known as the "cloud" or "Kumo".

Interpretation

The Ichimoku Cloud is interpreted as follows:

  • When price is above the cloud, the trend is up. When price is below the cloud, the trend is down. Prices in the cloud indicate a neutral trend.

  • The cloud edges act as support and resistance levels. If price is above the cloud and falls towards it, the cloud acts as support. If price is below the cloud and rises towards it, the cloud acts as resistance.

  • The Conversion Line crossing above the Base Line is a bullish signal, and crossing below is a bearish signal.

Indicator Triggers: (coming)

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