Ichimoku Cloud
A trend-following strategy built on Ichimoku Kinko Hyo ("one glance equilibrium chart") - a Japanese composite indicator with five interrelated lines rather than one numeric value.
A trend-following strategy built on Ichimoku Kinko Hyo ("one glance equilibrium chart") - a Japanese composite indicator with five interrelated lines rather than one numeric value. Buy when price is above the cloud (both Senkou spans) and the Conversion Line (Tenkan-sen) is above the Base Line (Kijun-sen); exit when price drops back below the Base Line.
Objective
Confirm a trend from three angles at once - price position relative to a volatility/momentum-implied cloud, and the relative position of a fast line (Tenkan, 9-period) versus a slower one (Kijun, 26-period) - before entering, then exit on the single, simpler signal of price falling back through the Base Line.
Entry
Close > ICHIMOKU_CLOUD() AND TENKANSEN() > KIJUNSEN()
Price is above both Senkou spans (the cloud) and the Conversion Line is above the Base Line.
Exit
Close < KIJUNSEN()
Price has dropped below the Base Line - the simpler of the two exit options the proposal listed (Close < KIJUNSEN()), not a full reversal of the entry logic.
When it works best
Needs a genuine, sustained trend - Ichimoku's lines are all built from rolling high/low midpoints over fairly long windows (9/26/52 candles), so in a sideways or choppy market the cloud stays thin and price will cross in and out of it repeatedly with no real edge.
Suitable instruments
| Ticker | Why it was chosen |
|---|---|
| RELIANCE.NS | Highly liquid, moderate volatility large-cap |
| TCS.NS | Liquid IT major with clear directional runs |
| INFY.NS | Similar profile to TCS, second-largest IT major |
| HDFCBANK.NS | Deep liquidity, large private bank |
| ICICIBANK.NS | Liquid private bank with more volatility than HDFC |
| LT.NS | Large-cap capital goods, sustained multi-month trends |
| ITC.NS | Liquid large-cap FMCG, historically lower volatility |
| SBIN.NS | Liquid PSU bank, historically trend-prone |
| ASIANPAINT.NS | Liquid large-cap paints major |
| BAJFINANCE.NS | High-growth large-cap NBFC, sharper directional moves |
Advantages
- Combines a momentum comparison (Tenkan vs. Kijun) with a level comparison (price vs. cloud) in one entry rule, rather than relying on a single line
- All five outputs (
TENKAN/KIJUN/SENKOU_SPAN_A/SENKOU_SPAN_B/CHIKOU_SPAN) are computed once per candle no matter how many of them a strategy references ICHIMOKU_CLOUD()lets a strategy check "above/below the cloud" without manually writing out both span comparisons every time
Limitations
- Long warm-up: Senkou Span B alone needs roughly 78 candles of history before it has a first value (a 52-candle window, displaced 26 more) - far longer than most indicators in this library
- Whipsaws in a range-bound market, same as any trend-confirmation system with no explicit filter beyond its own lines
Best practices
- Give the strategy at least 90-100 candles of history before relying on any signal, well past the raw 78-candle minimum
- Consider adding an explicit exit on
Close < ICHIMOKU_CLOUD()(fully below the cloud) as a more conservative alternative to the simplerClose < KIJUNSEN()used here, if the delayed-exit behavior above is undesirable for a given use case - Pair with the same large-cap, sustained-trend basket already used for other Trend Following strategies in this library - Ichimoku's slow-moving lines need a real trend to reward the wait
Common mistakes
- Expecting the exit to fire the instant
Close < KIJUNSEN()- as shown in Example Trade, a still-true BUY condition on the same candle can delay it - Applying it to a short history - anything under ~90 candles won't have a Senkou Span B value for most of the window
- Treating
ICHIMOKU_CLOUD()as usable anywhere a normal indicator is (arithmetic,==/!=) - it only works in a direct>/>=/</<=comparison
Backtest this strategy yourself
Build these rules on the Free plan, adjust them, and see how they would have traded.