Ichimoku Cloud (ICHI): How to Read It
The Ichimoku Cloud is an all-in-one system showing trend, momentum and support and resistance through five lines and a shaded cloud. It looks busy at first but gives a rich picture at a glance once learned.
The formula
Common settings: 9, 26, 52
How to read it
- Price above the cloud suggests an uptrend.
- Price below the cloud suggests a downtrend.
- Price inside the cloud suggests indecision.
- A thick cloud represents stronger support or resistance.
- Tenkan above Kijun suggests short-term bullish momentum.
Typical signals
- Tenkan crossing above Kijun above the cloud as a strong bullish signal.
- Price breaking out of the cloud as a trend change.
- Cloud color changing as a shift in future bias.
- Chikou above past price as confirmation.
Pitfalls to avoid
- Visually complex for beginners.
- Lags in fast-moving markets.
- Original settings were designed for a different trading week length and may need testing.
FAQ
What is the cloud?
It is the shaded area between Senkou A and Senkou B, projected forward to show possible future support or resistance.
Why is the cloud shifted forward?
Projecting it 26 periods ahead gives a view of where support or resistance may sit.
Is Ichimoku good for crypto?
Many crypto traders use it, sometimes with adjusted settings for round-the-clock markets.
Works well with
Average Directional Index
The Average Directional Index measures how strong a trend is, regardless of its direction. Paired with the +DI and -DI lines, it also helps identify which side is in control.
🌡️Relative Strength Index
The Relative Strength Index measures the speed and size of recent gains versus losses on a scale from 0 to 100. It helps spot when a market may be stretched too far in one direction.
🔀Moving Average Convergence Divergence
MACD tracks the gap between a fast and slow EMA to reveal changes in trend momentum. A signal line and histogram make it easier to see when momentum is building or fading.