Ichimoku Cloud Basics: Framing Trend and Balance with the Cloud

In this chapter we focus on the Ichimoku Cloud.

Not “wait for five Ichimoku checklist signals to align,”
but:
“How does this structure show where the market is
unbalanced, and where it seeks equilibrium?”

In trend, Ichimoku acts as a framework that combines:

trend direction,
dynamic support/resistance,
and a basic time component.

In ichimoku it becomes the basis for
breakout, pullback, and trend continuation strategies.

The diagram below shows, on one screen:

the conversion line and base line,
the cloud (Senkou Span A/B),
and the lagging span,

highlighting how they line up in:

strong uptrends,
ranges,
and strong downtrends.

Ichimoku conversion and base lines, cloud, and lagging span plotted around price to compare a bullish trend structure, a range, and a bearish trend structure side by side

1. Ichimoku Components at a Glance

Standard Ichimoku settings typically include five elements:

Conversion Line (Tenkan-sen)
- midpoint of the highest high and lowest low
  over a short window (e.g., 9 periods),
- represents a short-term equilibrium.
Base Line (Kijun-sen)
- midpoint over a longer window (e.g., 26 periods),
- acts as a medium-term reference price.
Leading Span A (Senkou Span A)
- (Conversion + Base) / 2,
- plotted forward (e.g., 26 periods),
- one boundary of the cloud.
Leading Span B (Senkou Span B)
- midpoint of an even longer range (e.g., 52 periods),
- also plotted forward,
- the other boundary of the cloud.
Lagging Span (Chikou Span)
- the current closing price shifted backward,
- shows where “today’s price” sits relative to past structure.

The conversion and base lines play roles similar to
short- and medium-term MAs from ma,
but they use high-low midpoints instead of close averages.

The cloud projects future support/resistance and equilibrium zones,
and the lagging span compresses timeframes
into one line that says:

“Is today’s price above or below the past battle zone?”

2. Conversion & Base Lines: Short- and Medium-Term Balance

2-1. Conversion Line (Tenkan-sen)

short-term midpoint of high and low,
price above Tenkan → short-term bullish bias,
price below Tenkan → short-term bearish bias.

It tends to:

turn quickly,
cross price often,

and reflects the short-term rhythm.

2-2. Base Line (Kijun-sen)

longer-term midpoint,
price above Kijun → medium-term bullish control,
price below Kijun → medium-term bearish control.

Kijun often acts like a trend backbone, similar to a medium MA:

pullbacks to Kijun that find support and reverse
with candles confirmation
can become re-entry candidates.

The diagram below contrasts:

left: a clean uptrend with Conversion and Base lines
aligned and trending upward beneath price,
right: a range where both lines constantly weave through price.

On the left conversion and base lines are aligned and trending upward beneath price, on the right both lines are tangled with price inside a sideways range

3. The Cloud: Projected Support, Resistance, and Equilibrium

The cloud (Kumo) is formed by Leading Spans A and B.

3-1. Cloud Direction and Trend

Bullish cloud:
Span A above Span B, cloud tilting upward.
Bearish cloud:
Span A below Span B, cloud tilting downward.

Price:

above the cloud → trend is usually up,
below the cloud → trend is usually down,
inside the cloud → market is often in a
s-r style balance/range.

3-2. Cloud Thickness: Strength and Uncertainty

Thick cloud
- compresses many past battles into one zone,
- tends to act as a stronger support/resistance region,
- often tested multiple times rather than broken cleanly.
Thin cloud
- shows areas where equilibrium shifted quickly,
- prone to breaks and fakeouts.

The diagram below shows:

left: an uptrend where price rides above a thick bullish cloud
and uses the cloud as dynamic support,
right: a thin cloud region where price briefly breaks above
then snaps back below—
a typical failure style move.

On the left price trends above a thick bullish cloud using it as dynamic support, on the right price breaks above a thin cloud briefly and then falls back below in a fakeout move

4. Lagging Span: Today’s Price in Yesterday’s Structure

The lagging span is the current close shifted backward.

The question it answers:

“If I place today’s price in the past,
is it above or below the old swings and cloud?”

Common interpretations:

lagging span above past price
→ bullish structure dominance.
lagging span below past price
→ bearish structure dominance.
lagging span tangled within past price
→ range or noisy regime
(swing-vs-correction).

The diagram below compares:

left: a strong uptrend with the lagging span
well above past price and cloud,
right: a range where the lagging span
spends most of its time tangled within past candles.

On the left the lagging span stays above past price and the cloud in a strong uptrend, on the right the lagging span overlaps past candles repeatedly inside a range

5. Three Regimes Through the Lens of Ichimoku

When you apply Ichimoku, it helps to classify the market into
one of three regimes first.

5-1. Strong Uptrend

Often characterized by:

price above the cloud,
a clearly bullish, reasonably thick cloud,
Conversion above Base, both above the cloud,
lagging span above past price and cloud.

Here you would:

use ma and Kijun as
pullback reference levels,
watch part-1~4
for re-entry signals near those levels.

5-2. Range / Balance

Typical signs:

price inside the cloud,
cloud is thin and frequently twisting,
Conversion, Base, and lagging span
constantly overlapping price.

In this regime, it’s often more natural to focus on:

double-top-bottom,
other range top/bottom structures,

rather than trend-following.

5-3. Strong Downtrend

Mirror image of the uptrend:

price below the cloud,
a bearish, reasonably thick cloud,
Conversion below Base, both beneath the cloud,
lagging span below past price and cloud.

In such cases:

rallies up into the cloud or Kijun
can offer short re-entry opportunities.

The diagram below places:

a bullish Ichimoku structure,
a range structure,
and a bearish structure

side by side for comparison.

Three side-by-side Ichimoku structures: a bullish pattern with price above a rising cloud, a range with price inside a twisting cloud, and a bearish pattern with price below a falling cloud

6. Common Traps When Using Ichimoku

Demanding too many conditions at once
- Requiring five separate Ichimoku conditions to align
  may filter out almost all opportunities
  and leave you always late.
Forcing Ichimoku onto every market and timeframe
- Very low volatility or illiquid markets,
- extended long-term ranges,
  can make Ichimoku act like a very slow, lagging filter.
Watching only the cloud and ignoring price structure
- Trading cloud color and position alone
  without candles and patterns
  is essentially trading the indicator rather than the market.
Trusting the cloud without risk management
- A thick cloud is not an invincible barrier.
- risk-management—position size, stop distance,
  and maximum loss per trade—must always come first.

7. Practical Ichimoku Checklist

With Ichimoku on your chart, ask:

Is price above, inside, or below the cloud?
Is the cloud bullish, bearish, or tangled and twisting?
How are Conversion and Base lines aligned,
and how far are they from price?
Where is the lagging span relative to past price and cloud?
If I act on this context,
do my stop, target, and size respect
risk-management?

Ichimoku, together with:

ma,
macd,

gives you a richer way to see trend structure and balance.

In ichimoku we will turn this framework into
explicit breakout and pullback rules,
always keeping the focus on:

“How does this tool summarize structure?”
rather than
“Which indicator signal fires next?”