Strategies School / Trend & Indicators
Ichimoku Cloud Strategy
Intermediate ยท 10 min read
A single indicator that shows trend, momentum and support in one view.
What it is
Ichimoku has five lines (default 9, 26, 52). Tenkan-sen is the fast line and Kijun-sen is the slower baseline. Senkou Span A and B form the cloud (Kumo). Chikou Span is the lagging line.
Price above the cloud suggests an uptrend, below suggests a downtrend, inside means no clear trend. Tenkan crossing above Kijun, with price above the cloud, is a bullish signal.
The cloud also acts as dynamic support and resistance, and its thickness hints at strength.
How to spot it
- Check where price is relative to the cloud.
- Look for Tenkan above Kijun in an uptrend.
- Check that the Chikou Span is above price from 26 periods ago.
- Prefer pullbacks that hold above the cloud.
Trade plan
- Entry: On a close above the cloud with a bullish Tenkan/Kijun cross, or on a pullback that holds above the cloud top.
- Stop loss: Below the cloud or the Kijun, depending on your risk.
- Target: The next swing high or trail the stop under the Kijun.
Common mistakes
- Wrong: Trading inside the cloud. Right: Stay out until price leaves it.
- Wrong: Using the default settings blindly on every market. Right: Test settings that fit your market.
Pro tip: A thick cloud is stronger support or resistance than a thin one. Thin clouds break more easily.
Quiz
- Price above the cloud suggests: Answer: An uptrend. It signals a bullish trend.
- The Kijun-sen is: Answer: The slower baseline. Kijun is the 26-period baseline.
- You should avoid trading: Answer: Inside the cloud. Inside the cloud the trend is unclear.
Educational content, not financial advice. Diagrams are illustrations, not real market data.