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

1. Confirm the cloud is green and price is above it (long) — or red and below (short)
2. Wait for the Tenkan-sen to cross above the Kijun-sen (long) or below it (short)
3. Confirm the Chikou span is above (long) or below (short) the price 26 periods ago
4. Enter on the next bar's open after the cross closes
5. 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.