Ch7. Ichimoku Cloud ① — Dissecting the Five Lines and the Cloud

Overview: Reading the Market Through Time and Balance

Ichimoku Kinko Hyo (一目均衡表) was created by Goichi Hosoda (pen name Ichimoku Sanjin) in 1930s Japan. The name literally means “a one-glance (一目) view of the market’s balance.” Where other indicators focus on price, Ichimoku adds the axis of time to show trend in three dimensions.

Goal of this lesson: Accurately understand the calculation and meaning of Ichimoku’s five lines and the Cloud (spans). Practical trading comes in Lesson 8.

1. The Philosophy of Ichimoku

Ichimoku is a vast system of three theories (wave, time, and price-level), but what appears on the chart is essentially five lines and the cloud. Two premises underlie it.

The market seeks balance — price may lean one way temporarily, but returns to balance (the center).
Time creates change — not just price, but the variable of “how many days ahead” creates turning points.

The default settings 9, 26, 52 come from Hosoda’s analysis of historical Japanese markets (when a month ≈ 26 trading days under a six-day week). They remain the standard today, though some optimize them per market or instrument.

2. The Five Lines

Line	Calculation	Character
Tenkan-sen (Conversion)	(9-period high + low) ÷ 2	Short-term, 9-day center
Kijun-sen (Base)	(26-period high + low) ÷ 2	Mid-term, 26-day center
Senkou Span A	(Tenkan + Kijun) ÷ 2, plotted 26 ahead	Cloud edge
Senkou Span B	(52-period high + low) ÷ 2, plotted 26 ahead	Cloud edge
Chikou Span (Lagging)	Today’s close plotted 26 back	Current vs. past position

Tenkan and Kijun

They look like moving averages but differ. An MA is the “average of closes”; Tenkan and Kijun are the midpoint of the period’s high and low — the “balance price” of that span.

Tenkan above Kijun → short-term bullish bias
Price above a rising Kijun → mid-term trend is healthy

The Kijun is the spine of the trend. A flat Kijun means no trend (ranging); a rising Kijun acts as the centerline of an uptrend. It often serves as strong support when price corrects.

3. The Cloud (Kumo) — The Heart of Ichimoku

The space between Senkou Span A and B, filled with color, is the Cloud (Kumo). Because both lines are plotted 26 periods into the future, the cloud is drawn ahead of price at the right edge of the chart.

       ░░░░░░░  ← Cloud (spans plotted 26 ahead)
price /░░░░░░
    /
─────────────────→ time

What the Cloud Tells You

State	Meaning
Price above the cloud	Uptrend — cloud is support
Price below the cloud	Downtrend — cloud is resistance
Price inside the cloud	Unclear trend — stand aside
Thick cloud	Strong support/resistance (hard to break)
Thin cloud	Weak support/resistance (easy to break)

Bullish and Bearish Clouds

Bullish cloud (Span A > Span B): bias upward
Bearish cloud (Span A < Span B): bias downward
Where the two spans cross is the cloud twist, a clue to a trend change.

Ichimoku’s greatest weapon is that the cloud shows 26 periods of the future in advance — you can see upcoming support/resistance ahead of time. But when price enters the cloud, direction is lost, so avoid trading inside the cloud.

4. Chikou Span — The Simplest Yet Powerful Line

The Chikou Span simply plots today’s close 26 periods back. The simplest to compute, yet Hosoda valued it highly.

Chikou above the price of 26 periods ago → bullish confirmation
Chikou below the price of 26 periods ago → bearish confirmation

It compares current strength directly with the past — a final check of whether a trend is real.

5. The Five Lines Across Time, at a Glance

Line	Time position
Chikou Span	26 periods past
Tenkan, Kijun	Present
Senkou Span A/B (Cloud)	26 periods future

Past, present, and future on one screen — this is Ichimoku’s identity, and the source of its name “one glance at balance.”

Key Takeaways

Ichimoku adds the axis of “time” to price (settings 9·26·52).
Tenkan (9) and Kijun (26) are midpoints of period highs/lows (balance prices); the Kijun is the trend’s center.
The Cloud, formed by Spans A and B, is plotted 26 ahead and shows upcoming support/resistance.
Price above the cloud = up, below = down, inside = stand aside; a thicker cloud is stronger.
The Chikou Span plots the close 26 back to confirm current strength against the past.

Next lesson: We combine the five lines and cloud into real trades — Tenkan/Kijun crosses, cloud breakouts, and Ichimoku’s strongest signal, the three-role reversal (Sanyaku Kouten).