Ichimoku Kinko Hyo: The Market at a Glance

One indicator that shows trend, momentum, support and resistance together. Its name promises that a single look is enough.

Where it comes from

Ichimoku Kinko Hyo, roughly “one-glance balance chart”, was created by the Japanese journalist Goichi Hosoda, who wrote under the pen name Ichimoku Sanjin. He reportedly spent about thirty years testing the method with the help of assistants before publishing it in the late 1960s. Western traders discovered it much later, through books and charting software, and it is now built into nearly every platform.

The five lines and the cloud

  • Tenkan-sen (conversion line): the midpoint of the highest high and lowest low of the last 9 periods. It is the fast line.
  • Kijun-sen (base line): the same midpoint over 26 periods. It is slower and often acts as support or resistance.
  • Senkou Span A: the average of Tenkan and Kijun, plotted 26 periods ahead.
  • Senkou Span B: the midpoint of the 52-period range, also plotted 26 periods ahead.
  • Chikou span (lagging span): today’s close, plotted 26 periods back.

The area between the two Senkou spans is the kumo, or cloud. It is usually shaded green when Span A is above Span B and red when it is below, though colours vary by platform. The settings 9, 26 and 52 come from the Japanese trading calendar, when markets ran six days a week: about a week and a half, a month and two months. Many traders keep them even in markets that never close.

Illustrative Ichimoku chart Price starts below a red-to-green cloud, rises above it, and the Tenkan line crosses above the Kijun line. The cloud drawn ahead of the last bar is green. Last bar 26 bars ahead Price breaks above the cloud Tenkan crosses above Kijun Cloud ahead is green: bullish Price Tenkan Kijun Chikou Cloud (kumo)
Figure 1. Illustrative data computed with the standard 9-26-52 formulas.

Reading the chart

Price against the cloud comes first: above it the bias is bullish, below it bearish, and inside it the market is undecided. A thick cloud is a stronger barrier, a thin one is easy to cross. Because the cloud is drawn ahead, you can see the coming support and resistance, and its colour hints at the next bias. The Tenkan and Kijun cross works like a moving average cross: Tenkan above Kijun is bullish, and the signal is stronger above the cloud than inside or below it. The Chikou span confirms: a bullish signal is better when it sits above the price of 26 periods ago. The strongest setups are those where most of these agree.

Price relative to the cloud Three small charts: price above the cloud, price inside the cloud, and price below the cloud. Price above the cloud bullish bias Price inside the cloud undecided, no clear trend Price below the cloud bearish bias
Figure 2. The first question Ichimoku asks: where is price relative to the cloud?

Using it with care

Ichimoku works best on trending markets and on daily or weekly charts. In tight ranges the lines tangle and produce many false signals, so a trend-strength filter such as the ADX helps. Treat the cloud edges and the Kijun as zones for placing stops, not as guarantees. The indicator describes the present balance of the market; it does not forecast it.

Educational content only. It is not investment advice, and trading involves risk of loss.

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