Ichimoku Cloud

Five components in one -- Tenkan-sen, Kijun-sen, Senkou Spans, Chikou Span, and how to read the cloud.

What is the Ichimoku Cloud?

Ichimoku Kinko Hyo -- usually just called "Ichimoku" -- is a comprehensive indicator that shows trend direction, support and resistance levels, and momentum in a single view. The name translates roughly to "one glance equilibrium chart," and the idea is that you can assess the market's condition with one look.

Ichimoku looks complex because it draws five lines and a shaded "cloud" on the price chart. But each component is built from simple calculations -- averages of the highest high and lowest low over different lookback periods. The power comes from how the components work together, not from any single line.

Price above the cloud signals a bullish trend. The cloud (shaded area between Senkou A and B) acts as support below. The cloud extends into the future based on current data.

The Five Components

Tenkan-sen (Conversion Line)

The midpoint of the highest high and lowest low over the last 9 candles. This is the fastest-moving line and tracks the short-term trend.

Tenkan-sen

Tenkan = (highest high of 9 + lowest low of 9) / 2

Kijun-sen (Base Line)

The midpoint of the highest high and lowest low over the last 26 candles. This is the medium-term reference line. When price is above the Kijun-sen, the medium-term trend is bullish.

Kijun-sen

Kijun = (highest high of 26 + lowest low of 26) / 2

Senkou Span A (Leading Span A)

The average of Tenkan-sen and Kijun-sen, plotted 26 candles ahead of the current candle. This forms one edge of the cloud.

Senkou Span A

Senkou A = (Tenkan + Kijun) / 2, plotted 26 candles forward

Senkou Span B (Leading Span B)

The midpoint of the highest high and lowest low over the last 52 candles, plotted 26 candles ahead. This forms the other edge of the cloud. Because it uses a longer lookback, it moves more slowly than Senkou Span A.

Senkou Span B

Senkou B = (highest high of 52 + lowest low of 52) / 2, plotted 26 candles forward

Chikou Span (Lagging Span)

The current closing price plotted 26 candles behind the current candle. This lets you visually compare the current price to where it was 26 candles ago.

Why are some lines plotted in the future or past?

Senkou Spans A and B are plotted 26 candles ahead to show where support and resistance levels will be in the near future. Chikou Span is plotted 26 candles behind to show how the current price compares to the past. These displacements are a core design feature of Ichimoku, not an error.

The Cloud (Kumo)

The shaded area between Senkou Span A and Senkou Span B is the "cloud" or "Kumo." It serves as a dynamic zone of support and resistance:

Price above the cloud

The overall trend is bullish. The cloud acts as support below.

Price below the cloud

The overall trend is bearish. The cloud acts as resistance above.

Price inside the cloud

The trend is uncertain or transitioning. The market is in a "no man's land" between support and resistance.

Thick cloud

Strong support or resistance. A thick cloud is harder for price to break through.

Thin cloud

Weak support or resistance. Price can pass through more easily. Thin cloud areas represent potential breakout zones.

Common Signals

Tenkan/Kijun crossover

When Tenkan-sen crosses above Kijun-sen, it is a bullish signal (short-term trend is outpacing the medium-term). When it crosses below, it is bearish. The signal is stronger when it occurs above the cloud (bullish crossover in a bullish context) and weaker when it occurs below the cloud (bullish crossover in a bearish context).

Cloud breakout

When price breaks above the cloud from below, it is a strong bullish signal -- the price has pushed through the resistance zone. When price breaks below the cloud from above, it is a strong bearish signal. These are considered the most significant Ichimoku signals because the cloud represents a meaningful support/resistance zone, not just a single line.

Chikou Span confirmation

Some traders use Chikou Span as confirmation: if the current price (via Chikou) is above the price from 26 candles ago, the trend has momentum. If it is below, the trend may be weakening. This is essentially a visual 26-period rate of change.

Chikou is a chart reference, not a builder condition

Simula shows the Chikou Span on the chart for visual reference but does not offer it as a selectable condition operand. The classic "Chikou versus the price at its plotted position 26 candles back" comparison is fine to read by eye, but wiring it as an automated condition invites look-ahead bias -- so the strategy builder keeps its Ichimoku signals to the Tenkan/Kijun cross and cloud breakouts, which it can evaluate safely.

Parameters

Tenkan period (default: 9)

Lookback for the Conversion Line. Shorter = more responsive.

Kijun period (default: 26)

Lookback for the Base Line. Also used as the displacement for Senkou Spans and Chikou Span.

Senkou B period (default: 52)

Lookback for the slower cloud edge. 52 represents roughly two months of daily candles (26 * 2).

Displacement (default: 26)

How far forward (Senkou Spans) or backward (Chikou) to plot the lines. Matches the Kijun period by default.

The default periods (9, 26, 52) were developed for Japanese stock market trading where the trading week was 6 days. The numbers have become standard regardless of market. Parameter optimization can test whether different values work better for your specific asset and timeframe.

Things to Watch Out For

Ichimoku looks more complex than it is

Five lines plus a cloud can overwhelm a chart visually. Start by focusing on just two things: is price above or below the cloud (overall trend), and are Tenkan and Kijun crossing (momentum shift). The other components add nuance but are not required to get value from Ichimoku.

Ichimoku struggles in ranging markets

When the market moves sideways, the Tenkan and Kijun lines flatten and interweave, producing frequent crossovers without follow-through. The cloud becomes thin and provides little support or resistance. Like other trend indicators, Ichimoku works best when the market has a clear direction.

The cloud is plotted 26 candles ahead

The future cloud is based on current data, not a prediction. It shows where support and resistance will be if conditions remain similar. The cloud can and does change as new candles arrive and shift the high/low calculations.

Where to Go Next

MACD -- a simpler trend/momentum indicator if Ichimoku feels too complex.

ADX -- pair with Ichimoku to confirm trend strength.

Trend Indicators Overview -- all 12 trend indicators available in Simula.

Trend Following -- strategies that use Ichimoku cloud breakouts and crossovers.