Ichimoku Cloud

Notes:

These indicators and concepts are specifically designed for TradingView.com

Overview

The cloud is formed by plotting two lines, called the Conversion Line and the Base Line, which are calculated using the highest high and lowest low over a specific period of time. The cloud is created by plotting the area between the two lines and is intended to identify support and resistance levels, as well as potential trend changes. The cloud can also be used to gauge the overall strength of a trend.

How to Trade

The Ichimoku Cloud is traded using a variety of techniques and strategies, but here are some general steps to follow when using it:

1. Identify the trend direction: The Ichimoku Cloud is used to identify the trend direction of a security. If the price is above the cloud, the trend is considered to be bullish, and if it is below the cloud, the trend is bearish.
2. Look for signals: The Ichimoku Cloud generates signals when the price crosses the various lines that make up the indicator. For example, a bullish signal is generated when the price crosses above the conversion line, while a bearish signal is generated when the price crosses below the baseline.
3. Use the cloud as a support/resistance level: The cloud can also be used as a support/resistance level. If the price is above the cloud, the cloud can act as support, and if the price is below the cloud, the cloud can act as resistance.
4. Take profit and stop loss levels: Traders can use the Ichimoku Cloud to set their profit and stop loss levels. For example, a trader could set their stop loss below the cloud if they are going long and above the cloud if they are going short.

How to Calculate

To calculate the Ichimoku Cloud, you can use the following steps:

1. Calculate the conversion line: (9-period high + 9-period low) / 2
2. Calculate the baseline: (26-period high + 26-period low) / 2
3. Calculate the leading span A: (Conversion line + baseline) / 2
4. Calculate the leading span B: (52-period high + 52-period low) / 2
5. Plot the cloud: Shade the area between leading span A and leading span B in different colors to visually represent the cloud.