What it measures

Ichimoku Kinko Hyo is a complete charting system from 1960s Japan: trend direction, support and resistance, and momentum, all from midpoints of recent ranges rather than from averages of closes. The cloud (kumo) is its signature: a band between two lines projected into the future, read as the zone price has to clear to change trend.

The calculation

Tenkan-sen (conversion) = (highest high + lowest low) / 2 over 9 bars Kijun-sen (base) = (highest high + lowest low) / 2 over 26 bars Senkou Span A = (Tenkan + Kijun) / 2, plotted 26 bars ahead Senkou Span B = (highest high + lowest low) / 2 over 52 bars, plotted 26 bars ahead Chikou Span = today's close, plotted 26 bars back

The cloud is the area between Senkou A and B. Because the lines are range midpoints, they go flat when price consolidates and step when it breaks, unlike an average.

Inputs and defaults

  • 9, 26, 52: Goichi Hosoda's periods, from six-day trading weeks (a week and a half, a month, two months). Crypto scripts often keep them anyway; some scale them to 10, 30, 60 for seven-day weeks.
  • Displacement: 26.

How it is read

Price above the cloud is an uptrend, below it a downtrend, inside it indecision. Tenkan crossing above Kijun is a bullish signal, stronger when it happens above the cloud. A thick cloud is strong support or resistance; a thin one is easily crossed. Chikou above the price of 26 bars ago confirms momentum.

Where it fails

Five lines give five things to disagree, and a strategy has to decide which ones gate the trade; the more it requires, the fewer trades it takes and the more it has been fitted. The projected cloud is not a forecast, it is a shifted average of the past. In a range the lines braid and the cloud flips colour repeatedly.

How the desk reads it

The desk reads an Ichimoku strategy by listing exactly which of the five lines it uses and treating each as a parameter. A rule that requires three of them to agree takes few trades and shows a clean curve, and the question is how many of the possible combinations the author tried before this one.

In the desk's screen

Of the 614 screened strategies in the library, 7 (1.1%) use this indicator somewhere in their logic.

5 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.