The Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a versatile indicator that defines support and resistance, identifies trend direction, gauges momentum and provides trading signals. Ichimoku Kinko Hyo translates into “one look equilibrium chart”. With one look, chartists can identify the trend and look for potential signals within that trend. The indicator was developed by Goichi Hosoda, a journalist, and published in his 1969 book. Even though the Ichimoku Cloud may seem complicated when viewed on the price chart, it is really a straightforward indicator that is very usable. It was, after all, created by a journalist, not a rocket scientist! Moreover, the concepts are easy to understand and the signals are well-defined.
The Cloud (Kumo) is the most prominent feature of the Ichimoku Cloud plots. The Leading Span A (green) and Leading Span B (red) form the Cloud. The Leading Span A is the average of the Conversion Line and the Base Line. Because the Conversion Line and Base Line are calculated with 9 and 26 periods, respectively, the green Cloud boundary moves faster than the red Cloud boundary, which is the average of the 52-day high and the 52-day low. It is the same principle with moving averages. Shorter moving averages are more sensitive and faster than longer moving averages.
There are two ways to identify the overall trend using the Cloud. First, the trend is up when prices are above the Cloud, down when prices are below the Cloud and flat when prices are in the Cloud.Second, the uptrend is strengthened when the Leading Span A (green cloud line) is rising and above the Leading Span B (red cloud line). This situation produces a green Cloud. Conversely, a downtrend is reinforced when the Leading Span A (green cloud line) is falling and below the Leading Span B (red cloud line). This situation produces a red Cloud. Because the Cloud is shifted forward 26 days, it also provides a glimpse of future support or resistance.
To find out more about this indicator and it`s trading signals click here.
Settings in the chart
Settings in Strategies
Since the Ichimoku Kinko Hyo indicator consists of three separate components (Tenkan, Kijun,Chinkou) each of which has its own parameters and values, in Strategy Builder the Ichimoku Kinko Hyo is also divided into three indicators:
- IHCI Tenkan
- IHCI Kijun
- IHCI Chinkou
All indicators can be used either together or separately with other indicators.