Ichimoku Cloud Explained: The Five Lines, Kumo, Tenkan-Kijun Cross and Chikou Span
Lesson 9 of 10 · Advanced
The philosophy of Ichimoku
Ichimoku Kinko Hyo was developed over many years by the Japanese journalist Goichi Hosoda, writing as “Ichimoku Sanjin,” and published in the 1960s. The name roughly means “equilibrium chart at a glance.” Unlike most indicators built from averages of closing prices, the main Ichimoku lines are midpoints of the high and low over a period; they show the balance between the highest and lowest prices. The system aims to show trend, momentum and support and resistance together on one chart.
This structural difference has an important consequence: Ichimoku lines stay flat until a new high or low is made within the period, and when one is, they move in steps. That is why they behave differently from the smooth, continuous motion of moving averages.
The five lines and their formulas
| Line | Formula (standard 9, 26, 52 settings) | Meaning |
| Tenkan-sen | (highest high of 9 periods + lowest low of 9 periods) ÷ 2 | Short-term equilibrium; the fast line |
| Kijun-sen | (highest high of 26 periods + lowest low of 26 periods) ÷ 2 | Medium-term equilibrium; the base line |
| Senkou Span A | (Tenkan + Kijun) ÷ 2, plotted 26 periods ahead | The fast edge of the cloud |
| Senkou Span B | (highest high of 52 periods + lowest low of 52 periods) ÷ 2, plotted 26 periods ahead | The slow edge of the cloud |
| Chikou Span | Current close, plotted 26 periods back | Compares today's price with the past |
The space between the two Senkou spans is called the cloud, or Kumo. When Span A is above Span B the cloud is bullish and is often shaded green on platforms; the reverse is a bearish cloud. The numbers 9, 26 and 52 were chosen in an era when the Japanese working week had six days: 9 was about a week and a half and 26 about one trading month. Some analysts test other settings for 24-hour markets, but the standard setting remains the most common, and many participants are looking at it.
Reading the cloud
- Price relative to the cloud. Price above the cloud means a bullish bias, below means bearish, and inside means indecision or a range.
- Cloud thickness. A thick cloud reflects a large gap between short- and long-term equilibrium and is usually seen as firmer support or resistance; a thin cloud is easier to break.
- Kumo twist. The point where Span A and Span B swap places. Because the cloud is plotted 26 periods ahead, the twist appears in the future part of the chart; but this is not a forecast, it is today's data plotted forward.
- Flat Kijun. When the Kijun stays horizontal for a while, the 26-period high and low have not changed; price often tends to return to that equilibrium level.
In practice the usual reading order goes from general to specific: first price relative to the cloud, then the color and thickness of the future cloud, then the relationship of price to the Kijun, and finally the TK cross and the state of the Chikou. The more conditions agree, the clearer the picture. But note that all of these components are built from the same highs and lows, so their agreement is not fully independent evidence.
The Tenkan-Kijun cross and the Chikou Span
Tenkan crossing above Kijun is a bullish cross, and the reverse is a bearish cross. In the classical approach, the strength of the cross depends on where it happens relative to the cloud:
- Strong: a bullish cross above the cloud, or a bearish cross below it; in line with the broader context.
- Neutral: a cross inside the cloud.
- Weak: a bullish cross below the cloud, or a bearish cross above it; against the broader context.
The Chikou Span is used for confirmation: if the Chikou is above price from 26 periods ago, and preferably above the cloud at that point, today's price is clearly higher than the past. When the Chikou is stuck among past candles, the market is probably ranging, and other Ichimoku signals carry less weight.
Gold example and limitations
The numbers are hypothetical. On the 4-hour chart gold is at 3890, the cloud below price spans 3840 to 3865, the Kijun is at 3872, the Tenkan is at 3884 and the Chikou is above the candles of 26 periods ago. The overall picture is bullish. If price pulls back to the 3872 Kijun and reacts there, that behavior is consistent with the trend. If price enters the cloud, the context shifts to neutral, and the cloud's thickness (25 dollars) suggests this area may be contested. A break below the cloud together with a bearish TK cross turns the bias bearish.
Limitations. Ichimoku is a trend system and becomes full of contradictory readings in a range. Because the lines are built from period highs and lows, one large news candle can shift all the lines in steps. Its visual clutter also leads beginners to weigh all the lines equally; it is better to learn the cloud and the Kijun first and add the other components later.
Common mistakes
- Interpreting the forward-plotted cloud as a price forecast.
- Using Ichimoku signals in a ranging market without a filter.
- Weighting every TK cross equally regardless of its position relative to the cloud.
- Changing the 9, 26, 52 settings without testing and a clear reason.
- Ignoring the Chikou Span completely, or relying on it too much.
What does volume say here?
Ichimoku defines equilibrium by the midpoint of high and low, while the volume profile defines it by where trading actually happened. The two are often close but not always the same. A flat Kijun is conceptually similar to the POC, the place the market keeps returning to. If the Kijun and the POC over a similar window are near each other, the equilibrium area is confirmed from two angles. If the Kijun sits in a low-volume area, it may merely be the product of a long wick on a news candle and carries less real value.
For the cloud, you can ask: when price reaches the cloud edge, does delta show aggressive selling being absorbed, or does price enter the cloud on strongly negative delta and rising volume? A TK cross that coincides with price reclaiming the session VWAP on positive delta has more behind it than one that formed on low volume in quiet hours. Combining them adds the “who and with how much volume” layer to Ichimoku's “where and in which direction.” For gold, use real volume from COMEX GC futures converted with the basis, not CFD tick volume.
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Frequently asked questions
Should Ichimoku settings be changed for gold?
The 9, 26, 52 setting is the standard and most widely used. Some analysts test other settings for 24-hour markets, but no setting's superiority can be claimed without testing on enough data.
What is the most important part of Ichimoku?
To begin with, the cloud and the Kijun-sen give the most information: the cloud shows the broad context and the Kijun the medium-term equilibrium. The other components can be added later as confirmation.
Which timeframe suits Ichimoku best?
Ichimoku is more readable in trending markets and on medium to long timeframes. On very short timeframes, noise and the stepwise jumps of the lines make interpretation difficult.
Education only, not a recommendation to buy or sell; we never give signals. Price examples are illustrative. Test any method on a demo account first, with strict risk management.