Ichimoku Cloud

What Is the Ichimoku Cloud?
The Ichimoku Cloud is a combination of technical indicators that shows the level of support and resistance, and overall power & trend direction in crypto market. It works by taking multiple averages and plotting them on charts.  It also uses these figures to calculate a “cloud” that attempts to forecast about the price and find support or resistance in the near future.

How to Calculate the Ichimoku Cloud

The highs and lows in the chart are actually the highest and lowest prices cryptocurrencies during the period of trade,  for example, the highest and lowest prices seen over the last nine days in the case of the conversion line.

Here are the some steps to calculate the Ichimoku Cloud;

1-    Base line: Base line is the mid position of the last 26 candlesticks. This line is calculated by the below formula;

(26 Period High + 26 Period Low÷ 2)

2-    Conversion Line: Conversion Line is the mid position of last 9 candlesticks. The line calculated formula is as under;

(9Period High + 9 Period Low ÷ 2)

3-    Lagging Span line: The Lagging Span lags behind the price and is projected 26 periods in the past.

4-    Calculate Leading Span A based on the prior calculations. Once calculated, this data point is plotted 26 periods into the future.

5-    Calculate Leading Span B. Plot this data point 26 periods into the future.

6-    For the Lagging Span, plot the closing price 26 periods into the past on the chart.

7-    The difference between Leading Span A and Leading Span B is colored into create the cloud.

8-    When Leading Span A is above Leading Span B, color the cloud green. When Leading Span A is below Leading Span B, color the cloud red.

9-    The above steps will create one data point. To create the lines, as each period comes to an end, go through the steps again to create new data points for that period. Connect the data points to each other to create the lines and cloud appearance.

 

What Does the Ichimoku Cloud Tell You?


The indicator shows relevant information by using averages. The overall trend is up when the price is above the cloud, down when the price is below the cloud, and trendless or transitioning when the price is in the cloud. When Leading Span A is rising and above Leading Span B, this helps to confirm the uptrend and the space between the lines is typically colored green. When Leading Span A is falling and below Leading Span B, this helps confirm the downtrend. The space between the lines is typically colored red in this case. Traders will often use the Ichimoku Cloud as an area of support and resistance depending on the relative location of the price. The cloud provides support/resistance levels that can be projected into the future. This sets the Ichimoku Cloud apart from many other technical indicators that only provide support and resistance levels for the current date and time.