Ichimoku Cloud Strategy
An Ichimoku Cloud strategy that uses the cloud, Tenkan, Kijun, and Chikou to confirm trend direction and time entries with confluence.
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Ichimoku Cloud Strategy
Overview
Ichimoku Kinko Hyo is a complete system in one indicator. The cloud (Kumo) defines trend and support/resistance; Tenkan-sen and Kijun-sen measure short- and medium-term momentum; the Chikou span confirms by plotting price 26 periods back. This strategy trades in the direction the full Ichimoku stack agrees on, entering on a Tenkan/Kijun cross with cloud confirmation.
Setup
- Instruments: forex majors, stocks, index ETFs, crypto
- Timeframe: 4H or daily
- Indicators: full Ichimoku (9, 26, 52, 26), ATR(14)
- Market regime: trending, with price clearly on one side of the cloud
A bullish stack is: price above the cloud, cloud green (Senkou A above B), Tenkan above Kijun, Chikou above price 26 periods ago.
Entry rules
- Confirm the cloud is green and price is above it (long) — or red and below (short)
- Wait for the Tenkan-sen to cross above the Kijun-sen (long) or below it (short)
- Confirm the Chikou span is above (long) or below (short) the price 26 periods ago
- Enter on the next bar's open after the cross closes
- Stronger entries occur when the cross happens near the cloud, not far from it
Stop loss
- Stop just beyond the opposite side of the cloud
- Alternative: below the Kijun-sen for longs, above for shorts
- Exit if price closes back inside the cloud — the trend is in doubt
Use the stop loss calculator to set the distance.
Take profit
- Hold while price stays on the correct side of the cloud
- Take partial profits at 2R, or when price reaches the far edge of the next cloud
- Exit fully when the Tenkan crosses back below the Kijun (long) or above it (short)
Confirm with the risk-reward calculator.
Risk management
- Risk 1% of account equity per Ichimoku trade
- Position size = risk amount ÷ (entry − stop). Verify with the position size calculator
- Maximum two open Ichimoku trades on correlated instruments
- Reduce size when the cloud is thin — thin clouds offer weak support/resistance
When it fails
Ichimoku fails when traders take signals in isolation — a Tenkan/Kijun cross against the cloud, or a Chikou that disagrees. The system works only when all five components agree. If price is inside the cloud, the market is neutral; stand aside until price exits with conviction.
Strategy is for educational purposes only. Not financial advice.