Trading Tips: Introduction to Ichimoku Clouds

Ichimoku clouds are a charting indicator created by Goichi Hosoda, a Japanese trader, that wanted to create a quick and easy way to look at a chart and be able to tell what is going on.

Ichimoku clouds allow support and resistance levels to be seen more easily, while also showing key information like momentum and trends.

Technical analysis tools such as Ichomuku Clouds are used to help make more educated guesses on price action.

We'll proceed to break down the key elements of Ichimoku Clouds and explain how they can be used to trade profitably.

On Tradingview, add the Ichimoku Cloud indicator by clicking the indicators and strategies button.

The Tenkan-Sen. The first component of the Ichimoku Cloud charting indicator is the Tenkan-Sen. The Tenkan-Sen is measured by taking the average of the highest high and lowest low for the last x periods.

The cloud is created by filling in the area between the Senkou Span A and B. Price above the cloud is a bullish signal while the price below a cloud is a bearish signal.

Price action inside the cloud is considered a neutral signal or "Turbulence" and is usually not traded in.

Less momentum would mean the price is less likely to breach the cloud because the price has been consolidating sideways.

The Ichimoku Cloud charting system is simply an indicator and will not always play out as expected.