Overview –

The indicator was developed by journalist Goichi Hosoda and was published in his 1969 book. This indicator reflects relevant information at glance by using averages. It’s a versatile indicator that defines support and resistance, recognizes trend direction, gauges momentum and describes trade signals. It uses averages which are different from a typical moving average. 

In This Article-

What is the Ichimoku Cloud ?

How to analyze charts using Ichimoku Cloud?

How to use Ichimoku Cloud on KEEV?

Category – Trend and Momentum

Type –Lagging

What is Ichimoku Cloud?

The Ichimoku Cloud is a collection of technical indicators that shows support and resistance levels as well as momentum and trade signals. This is done by taking multiple averages and plotting them on a chart. It uses these figures to compute a cloud that attempts to forecast where the price may find support or resistance in future. 

Here are the five formulas that compose Ichimoku Cloud Indicator. 

1. Conversion Line (Tenkan Sen) = (9-PH + 9-PL)/2

2. Base Line (Kijun Sen) = (26-PH + 26-PL)/2

3. Leading Span A (Senkou Span A ) = (CL + Base Line)/2 

4. Leading Span B ( Senkou Span B) = (52-PH + 52-PL)/2 

5. Lagging Span (Chikou Span) = Close plotted 26 periods in the past

Where:- 

PH= Period High

PL= Period Low

CL= Conversion Line 

How to analyze charts using Ichimoku Cloud ?

Now we shall try to understand how to analyze charts using the Ichimoku cloud 

Chart 1 

Image Source:- https://img.currency.com/imgs/blocks/834xx/ichimoku-cloud-indicator-lines.png

The Ichimoku Cloud (Kumo) is represented on the above chart and it's the area between the Leading Span A and Leading Span B lines. Formulating an Ichimoku Cloud strategy is very simple. You can easily locate a probable signal by determining where the price is located compared to the Ichimoku Cloud. 

• You can expect a positive trend is If the price is located above the Ichimoku Cloud

• If the price falls below the cloud it indicates a negative trend.

• If the price level is located within the cloud then it indicates a flat trend. 

The changes in the cloud occur based on the movement of the leading span line. For example, if the Leading Span A crosses the Leading Span B then the area will be green and it indicates the uptrend. When the Leading Span A falls below Leading Span B then the area between the lines will be red and indicate the downtrend.