The Ichimoku Cloud consists of multiple indicators. It provides multiple information in one chart, giving the trader as much information to make the most informed decision. The Inchimoku Cloud consists of 4 lines.
- Tenkan-sen: The Tenkan-sen line is the average of the highest and lowest price in the previous 9 periods.
- Kijun-sen: The Kijun-sen is similar to the Tenkan-sen line but calculated over the previous 26 periods.
- Senkou Span A: This is the mid point between the Tenkan-sen and Kijun-sen lines, plotted 26 periods into the future.
- Senkou Span B: This is the average of the highest and lowest price in the previous 52 periods, plotted 26 periods into the future.
The area between the Senkou Span A and B are filled and this creates the cloud-like pattern. The area is filled with green when the Senkou Span A is above the Senkou Span B. The area is filled with red when the Senkou Span B is above the Senkou Span A.
The Data Trader Ichimoku Cloud strategy has a BUY signal when the closing price moves above the cloud formed by the Senkou A and B lines. Exit when the closing price falls back into the cloud. A SELL signal is created when the closing price moves below the cloud. Exit when the closing price goes back up into the cloud.