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The Ichimoku Cloud, developed in Japan, is an all-in-one indicator built from several moving-average-like lines that together describe trend, momentum, and potential support or resistance. Its most recognizable feature is the "cloud," a shaded area formed between two lines called Senkou Span A and Senkou Span B, which is projected forward on the chart to show where future support or resistance may form.
Beyond the cloud, the indicator includes the Tenkan-sen, a fast line reacting quickly to price, and the Kijun-sen, a slower line that acts similarly to a longer-term moving average. A basic way to read the whole system without getting lost in every component is simply price versus the cloud: price trading above the cloud suggests an uptrend, price trading below it suggests a downtrend, and price trading inside the cloud suggests a period of indecision or consolidation. A thicker cloud implies stronger potential support or resistance, while a thin cloud suggests a weaker barrier likely to be broken easily.
Traders also watch for the Tenkan-sen crossing above or below the Kijun-sen as a secondary momentum signal, similar in spirit to a moving average crossover, and often filter those crossovers by whether price is above or below the cloud to gauge whether the signal aligns with the broader trend.
Because Ichimoku carries several overlapping lines and future-projected data, it can look intimidating and cluttered compared to the simpler tools covered earlier in this module. It is best treated as an optional, advanced overlay used for a quick visual read of trend and momentum together, rather than a primary system on its own, and works best when its signals are cross-checked against the market structure and momentum concepts already covered.
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