Trend Following · Classical · 1960s · Swing
A complete Japanese charting system that shows trend, momentum and support/resistance on one chart. The name roughly translates as ‘one-glance equilibrium chart’. It was developed by journalist Goichi Hosoda over decades before he published it in 1969. It looks dense at first, but every line is built from simple averages of recent highs and lows.
Ichimoku uses five lines. Tenkan-sen is the midpoint of the last 9 periods' high and low, and Kijun-sen the midpoint of the last 26. Two more lines, Senkou Span A and B, form the ‘cloud’: they are plotted 26 periods ahead of price, so the cloud shows where support or resistance will sit next. A fifth line, Chikou Span, is today's close plotted 26 periods back. In its simplest form, price above the cloud is bullish and price below it is bearish. Inside the cloud is no-man's land. A Tenkan/Kijun cross gives an early signal, and price clearing the cloud confirms it.
In a downtrend price trades below the cloud (the shaded band), and the cloud acts as overhead resistance. The two lines inside the chart — Tenkan (solid) and Kijun (dashed) — both point down.
As price turns up, the faster Tenkan line crosses above the slower Kijun — the 'TK cross'. An early signal, but while price is still under the cloud most traders treat it as a warning, not an entry.
Price closes above the top of the cloud. Trend, momentum and the system's support/resistance zone now all agree — the classic Ichimoku long signal.
The cloud projected ahead of price (Ichimoku plots it 26 periods forward) turns bullish, and the cloud becomes support beneath price. As long as price holds above it, the trend is intact.
Illustrative example only — not real market data.
The chart above shows the classic sequence: a downtrend under the cloud, an early Tenkan/Kijun cross, a break above the cloud, then the forward cloud turning bullish. (Chikou Span is left off to keep the chart readable.) The system's strength is that each signal confirms the others. Its weakness is the same: by the time everything agrees, a good part of the move has usually happened.