A Beginner’s Guide to the Ichimoku Indicator

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A Beginner’s Guide to the Ichimoku Indicator


Ichimoku Kinkō Hyō or Ichimoku for short is a technical indicator that helps traders to predict future price movements and market momentum and find support or resistance areas. It’s a combination of indicators that can give an overview of the market and help traders and investors to gauge the direction of the price using an all-in-one indicator in their technical analysis.

Ichimoku consists of 5 components: Tenkan Sen (the conversion line), Kijun Sen (the baseline), Senkou Span A (leading span A), Senkou Span B (leading span B), and the Chikou Span (lagging span). The way these components react to one another or to the price can give us further insights into the markets.

Now, let’s see what each of these components represents and how we can use them in our trading.

What is the Ichimoku indicator?

Ichimoku Kinkō Hyō or Ichimoku for short is an all-in-one indicator that can be used for gauging price movements and trends, market momentum, and potential support and resistance levels. The indicator is calculated based on moving averages that measure the average price of an asset over a preselected period of time.

Ichimoku consists of 5 different components which together help traders and investors with their market analysis. We will discuss these components in detail in the next section. For now, let’s see what the Ichimoku indicator looks like on a chart.

You can see an example of the Ichimoku indicator below.

Ichimoku indicator

The Ichimoku indicator on a Bitcoin chart on the DIFX spot exchange

All the lines and shapes may seem confusing at first glance and you may think the Ichimoku indicator is too complicated to use. But once we go through all the components and what they are used for, you will see how easier and more clear everything will become.

But before getting into the 5 components of the Ichimoku indicator, let’s take a quick look at its history and the mastermind behind it.

Who created the Ichimoku indicator?

A Japanese journalist named Goichi Hosoda created the Ichimoku indicator in the late 60s. Hosoda wanted to integrate different indicators into a single one to give traders and investors a comprehensive tool to gauge and analyze the markets.

This vision is also reflected in the title as “Ichimoku” translates to “one look” in Japanese.

What are the components of the Ichimoku indicator?

The Ichimoku indicator consists of 5 different components:

  1. Tenkan Sen (the conversion line)
  2. Kijun Sen (the baseline)
  3. Senkou Span A (leading span A)
  4. Senkou Span B (leading span B)
  5. Chikou Span (lagging span)                                                                            

Let’s take a look at the previous Bitcoin chart again and locate these lines on it.

Ichimoku indicator
  1. The blue line is Tenkan Sen or the conversion line. This line is the average of the highest and lowest price over the last 9 periods. This is its setting by default. The conversion line shows the short-term price movements and momentum of the asset and can act as a support or resistance line.
  2. The orange line is Kijun Sen or the baseline. This line is calculated the same way as the conversion line but over the last 26 periods. The baseline shows the medium-term price movements and momentum of the asset and can act as a support or resistance line.
  3. The dark green line is Senkou Span A or the leading span A. This line is the average of the conversion line and baseline. As a leading line, the average is shown over the next 26 periods. Senkou Span A is used to form the Ichimoku cloud.
  4. The light green line is Senkou Span B or the leading span B. This line is the average of the highest and lowest price over the last 52 periods. The result is then shown over the next 26 periods as it is also a leading line. Senkou Span B is another component used to form the Ichimoku cloud. The two lines are on either side of the cloud and can be treated as future support and resistance lines.
  5. The pink line is Chikou Span or the lagging span. Chikou Span is essentially the closing price of the current period. It is a lagging line and is shown over the past 26 periods.

How to use the Ichimoku indicator in trading

The position of the price compared to different components of the Ichimoku indicator or the way different components are reacting to one another can give us insights into the markets and the direction the price is headed.

The Ichimoku Cloud and the price

As mentioned above, the Ichimoku cloud is formed based on the leading span A (Senkou Span A) and the leading span B (Senkou Span B).

If the price of the asset is above the cloud, we can say that the trend is positive and consider it as a bullish signal. Conversely, if the price is below the cloud, we can expect a negative trend and consider it a bearish signal.


With the Ichimoku indicator, we can have different crossovers which can be bullish or bearish.

When Tenkan Sen (the conversion line) which is the shorter-term average crosses Kijun Sen (the baseline and the longer-term moving average) to the upside, the crossover can be considered bullish. On the flip side, when Tenkan Sen breaks Kijun Sen to the downside and moves below it, we can consider the signal bearish.

Senkou Span A and Senkou Span B can also have bullish or bearish crossovers. Buyers are in power when Senkou Span A crosses above Senkou Span B, indicating a bullish signal. On the other hand, sellers are controlling the market when Senkou Span A moves below Senkou Span B, showing a bearish condition.

The position of the crossover is another factor that we need to pay attention to. A bullish crossover above the Ichimoku cloud can give us more assurance over the bullish condition that a bullish crossover below the Ichimoku cloud.

The Chikou Span and the price

When Chikou Span or the lagging span and the price cross each other, a trend reversal may be imminent.

Additionally, when Chikou Span crosses the price to the upside, the market is signaling a bullish condition while an up-to-down crossover can be considered bearish.