Ichimoku Cloud Strategy

Overview

Ichimoku Kinko Hyo is a complete trend system in one indicator. The Cloud (Kumo) defines trend and support/resistance; the Tenkan-sen and Kijun-sen give momentum and equilibrium; the Chikou span confirms with lagged price. This strategy trades confirmed trend continuations.

Setup

• Instruments: liquid forex pairs, index futures, large-cap stocks
• Timeframe: 4-hour or daily (Ichimoku needs time to be reliable)
• Default settings: 9, 26, 52
• Components: Kumo (cloud), Tenkan-sen (9), Kijun-sen (26), Chikou span (26 lag)

Entry rules

1. Confirm trend: price is above the Kumo for longs, below for shorts
2. Cloud color confirms: green/bullish cloud for longs, red/bearish for shorts
3. Wait for the Tenkan-sen to cross above the Kijun-sen (bullish) and both above the cloud
4. Enter on the close of the crossover candle
5. Strengthen the signal if the Chikou span is above price (clear bullish confirmation)

Stop loss rules

• Stop: just below the Kijun-sen, or below the near edge of the Kumo
• Maximum risk per trade: 1% of account
• Exit if price closes back inside the Kumo — the trend has weakened

Take profit rules

• No fixed target — ride the trend while price stays above the cloud
• Trail the stop with the Kijun-sen
• Exit on the opposite Tenkan/Kijun cross or a close back into the Kumo
• Minimum RR: 2:1

Risk management

Parameter	Value
Risk per trade	1% of account
Max concurrent Ichimoku trades	3
Position size	Risk ÷ (entry − stop)
Cloud thickness filter	Skip if cloud is thin (< 0.5 × ATR)
Chikou rule	Require Chikou in clear space, no obstruction

Use the position size calculator and the risk-reward calculator for every entry.

When it fails

• Trading inside a thin cloud — no clear trend, frequent false signals
• Entering on Tenkan/Kijun cross alone without cloud confirmation
• Holding through a cloud color flip — the regime has changed

Key principle

Ichimoku's strength is its multi-layered confirmation: price, cloud, Tenkan/Kijun, Chikou all aligned. The more layers confirming, the higher the probability. Trade only when at least 3 of 4 components agree.