📊 TECHNICAL
Ichimoku Cloud
A comprehensive indicator system showing support/resistance, trend direction, momentum, and future levels simultaneously. The "Cloud" (Kumo) provides a visual framework for trend context.
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Live Demo — Ichimoku Cloud applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is Ichimoku Cloud?
The Ichimoku Kinko Hyo ("equilibrium at a glance") was developed by Japanese journalist Goichi Hosoda in the late 1930s and published in 1968. It is a complete trading system in a single indicator, showing trend direction, momentum, support/resistance, and even future levels simultaneously.
The Five Lines
| Line | Japanese Name | Calculation | Meaning |
|---|---|---|---|
| Conversion Line | Tenkan-sen | (9-period high + low) / 2 | Short-term momentum |
| Base Line | Kijun-sen | (26-period high + low) / 2 | Medium-term trend |
| Leading Span A | Senkou Span A | (Tenkan + Kijun) / 2, plotted 26 periods forward | Future support/resistance |
| Leading Span B | Senkou Span B | (52-period high + low) / 2, plotted 26 periods forward | Future support/resistance |
| Lagging Span | Chikou Span | Current close plotted 26 periods backward | Momentum confirmation |
The Cloud (Kumo)
The area between Senkou Span A and B forms the Kumo (cloud):
- Green cloud (Span A > Span B) → Bullish trend
- Red cloud (Span B > Span A) → Bearish trend
- Cloud thickness → Strength of support/resistance
- Future cloud → Shows upcoming S/R levels before price reaches them
Signal Interpretation
- Price above cloud → Strong bullish trend
- Price below cloud → Strong bearish trend
- Price inside cloud → Neutral / consolidation; avoid trading
- Tenkan crosses Kijun upward → Bullish TK cross (strong if above cloud)
- Chikou Span above price → Additional bullish confirmation
- Cloud twist → Senkou A crosses B = potential trend reversal
The Three Confirmation Rule
A strong bullish signal requires all three conditions:
1. Price is above the cloud
2. Tenkan-sen is above Kijun-sen
3. Chikou Span is above price (26 bars ago)
Tips & Best Practices
- Ichimoku was designed for daily charts — it works best at this timeframe.
- The default settings (9, 26, 52) were based on the 6-day Japanese trading week. For 5-day markets, some traders use (7, 22, 44).
- Don't try to trade inside the cloud — it's a zone of confusion.
- The future cloud is Ichimoku's unique feature — no other indicator shows future S/R levels.