Ichimoku Cloud - Complete Analysis System
Master the Ichimoku Kinko Hyo system - learn all 5 components, cloud trading strategies, and how GarudaAlgo uses Ichimoku for comprehensive market analysis.
What is Ichimoku Cloud?
The Ichimoku Kinko Hyo (一目均衡表), meaning "one glance equilibrium chart," was developed by Japanese journalist Goichi Hosoda in the late 1930s. It took 30 years of refinement before he released it publicly in 1969.
Unlike most indicators that only show one aspect of the market, Ichimoku is a complete trading system that shows:
- Support and resistance levels
- Trend direction
- Trend strength
- Future areas of support/resistance (projected 26 periods ahead)
- Momentum
The 5 Components
1. Tenkan-sen (Conversion Line)
転換線 - "Turning Line"
(9-period high + 9-period low) / 2
Fast-moving line showing short-term momentum. Similar to a 9-period moving average.
2. Kijun-sen (Base Line)
基準線 - "Standard Line"
(26-period high + 26-period low) / 2
Slower line showing medium-term trend. Acts as support/resistance.
3. Senkou Span A (Leading Span A)
先行スパンA
(Tenkan + Kijun) / 2, plotted 26 periods ahead
First cloud boundary. Forms support/resistance zones.
4. Senkou Span B (Leading Span B)
先行スパンB
(52-period high + 52-period low) / 2, plotted 26 periods ahead
Second cloud boundary. Slower, shows longer-term S/R.
5. Chikou Span (Lagging Span)
遅行スパン
Current closing price, plotted 26 periods back
Shows momentum by comparing current price to past price.
The Cloud (Kumo)
The area between Senkou Span A and Senkou Span B forms the Cloud (Kumo). This is the most important part of Ichimoku:
- Green/bullish cloud: When Span A is above Span B
- Red/bearish cloud: When Span B is above Span A
- Thick cloud: Strong support/resistance, trend likely to hold
- Thin cloud: Weak support/resistance, breakout more likely
How to Interpret Ichimoku
Quick Trend Assessment
Bullish Environment
- Price above the cloud
- Cloud is green (Span A > Span B)
- Tenkan above Kijun
- Chikou above past price
Bearish Environment
- Price below the cloud
- Cloud is red (Span B > Span A)
- Tenkan below Kijun
- Chikou below past price
Key Signals
- TK Cross (Tenkan/Kijun): Bullish when Tenkan crosses above Kijun, bearish when below
- Price/Cloud Cross: Strong signal when price breaks above or below the cloud
- Kumo Twist: When cloud changes color, indicates potential trend change
- Edge-to-Edge: Price entering cloud often travels to the other side
How GarudaAlgo Uses Ichimoku
GarudaAlgo Enhancement
GarudaAlgo uses Ichimoku as part of its trend analysis component, checking all 5 elements for confluence. We analyze the cloud's future projection to anticipate upcoming support/resistance zones 26 periods ahead.
Ichimoku Weight in Signal System
Ichimoku is part of the 14% Trend Analysis weight in GarudaAlgo's signal system.
What GarudaAlgo Analyzes
- Price vs Cloud Position: Above, below, or inside
- Cloud Color: Bullish (green) or bearish (red)
- Cloud Thickness: Strength of support/resistance
- TK Cross: Tenkan/Kijun crossovers
- Chikou Position: Above or below past candles
- Future Kumo: Projected cloud for upcoming S/R
| Component | Period | Purpose |
|---|---|---|
| Tenkan-sen | 9 | Short-term momentum |
| Kijun-sen | 26 | Medium-term trend |
| Senkou Span B | 52 | Long-term trend |
| Displacement | 26 | Cloud/Chikou offset |
Trading Strategies
Strategy 1: Cloud Breakout
- Wait for price to break above/below the cloud
- Confirm with Chikou Span (should also be clear of past price)
- Enter on the first pullback to cloud edge
- Stop loss on opposite side of cloud
Strategy 2: TK Cross with Cloud Confirmation
- Wait for Tenkan to cross Kijun
- Confirm price is on the correct side of cloud
- Higher probability when cross happens near the cloud
- Take profit at next significant Kijun level
Strategy 3: Kijun Bounce
- In an established trend, wait for price to pull back to Kijun
- Kijun acts as dynamic support/resistance
- Enter when price bounces off Kijun in trend direction
- Stop loss below Kijun (for longs) or above (for shorts)
Best Practices
- Works best on higher timeframes — H4 and Daily provide cleaner signals
- Wait for all 5 elements to align — Full confluence = highest probability
- Respect the cloud — Don't fight a thick cloud
- Use Kijun for stops — It's a natural equilibrium level
- Look ahead at future cloud — Plan for upcoming support/resistance