The Ichimoku Cloud was created by a Japanese journalist named Goichi Hosoda. The Ichimoku cloud uses five different lines, two of which compose of the cloud. The lines include a 9-period average, a 26-period average, an average of those two averages, a 52-period average, and closing price line that naturally has a slight lag. The two lines that make up the cloud have the area between them shaded in. The cloud is the most important part of the indicator. The above trend signals are made more powerful if the cloud is moving in tandem with price.

When an assets price is above the Ichimoku Cloud, this represents a bullish opportunity.

When an assets price is below the Ichimoku Cloud, this represents a bearish opportunity.

Calculation:

TenkanSen ( Conversion Line ) = ( Highest High + Lowest Low ) / 2
default period = 9

KijunSen ( Base Line ) = ( Highest High + Lowest Low ) / 2
default period = 26

KijunSen ( Base Line ) = ( Highest High + Lowest Low ) / 2
default period = 26

Chiku Span ( Lagging Span ) = Price Close shifted back 26 bars

Senkou A ( Leading Span A ) = ( TenkanSen + KijunSen ) / 2
(Senkou A is shifted forward 26 bars)

Senkou B ( Leading Span B ) = ( Highest High + Lowest Low ) / 2 using period = 52
(Senkou B is shifted forward 26 bars)