Ichimoku Cloud Trading Strategy

Even though the name implies one cloud, the Ichimoku Cloud is really a set of indicators designed as a stand alone trading system. These indicators can be used to identify support and resistance, determine trend direction and generate trading signals. Ichimoku Kinko Hyo, which is the full name, translates into “one look equilibrium chart”. With one look, chartists can identify the trend and look for potential signals within that trend.

Tenkan-sen (Conversion Line): 
(9-period high + 9-period low)/2)) </b> On a daily chart, this line is the mid point of the 9-day high-low range, which is almost two weeks.

Kijun-sen (Base Line): 
(26-period high + 26-period low)/2)) </b> On a daily chart, this line is the mid point of the 26-day high-low range, which is almost one month.

Senkou Span A (Leading Span A):
(Conversion Line + Base Line)/2)) </b> This is the midpoint between the Conversion Line and the Base Line. The Leading Span A forms one of the two Cloud boundaries. It is referred to as “Leading” because it is plotted 26 periods in the future and forms the faster Cloud boundary.

Senkou Span B (Leading Span B):
(52-period high + 52-period low)/2)) </b> On the daily chart, this line is the mid point of the 52-day high-low range, which is a little less than 3 months. The default calculation setting is 52 periods, but can be adjusted. This value is plotted 26 periods in the future and forms the slower Cloud boundary.

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