Crypto glossary
Ichimoku cloud
The Ichimoku cloud is a Japanese indicator system that shows trend, momentum and support and resistance at a glance using five lines and a shaded cloud.
Developed by journalist Goichi Hosoda and published in the late 1960s, Ichimoku Kinko Hyo combines five lines. The conversion line (tenkan-sen) and base line (kijun-sen) are midpoints of recent highs and lows over 9 and 26 periods. Two leading spans, plotted 26 periods ahead, form the cloud (kumo), and the lagging span plots the closing price 26 periods back.
The basic reading is that price above the cloud indicates an uptrend, below it a downtrend and inside it indecision. A thick cloud acts as strong support or resistance, while crosses between the conversion and base lines give momentum signals. Some crypto traders adjust the default settings to account for a market that trades seven days a week, for example using 10, 30 and 60.
Ichimoku packs a lot into one chart, which makes it intimidating and easy to misread. Like other trend tools, it performs poorly in sideways markets, and its signals lag sharp reversals.
Example
On the daily chart, BTC closes above the Ichimoku cloud for the first time in months while the conversion line crosses above the base line, and trend followers read it as a shift to bullish conditions.