Ichimoku Cloud on a Live Gold Chart

What it shows

Five lines. The Conversion Line and the Base Line follow price closely. Leading Span A and Leading Span B run ahead into the empty space to the right of the last candle, and the area between them is the cloud, shaded green while Span A is above Span B and red while it is below. The Lagging Span is the close drawn back in time.

How Pravex works it out

1. Three midpoint lines. Each one takes the highest high and the lowest low over a window and averages them: (highest high + lowest low) ÷ 2. The Conversion Line uses 9 candles, the Base Line 26, and Leading Span B 52.
2. Leading Span A = (Conversion Line + Base Line) ÷ 2.
3. The Lagging Span is simply the close of each candle.
4. Shifting: the Shift in candles setting (26) moves all three shifted lines, and the code shifts by that value minus one. So Leading Span A and B are drawn 25 candles forward, and the Lagging Span 25 candles back.

Settings

Setting	Default	What changing it does
Conversion line window	9	The window for the Conversion Line, the quickest of the midpoint lines. A shorter window makes it track price more tightly.
Base line window	26	The window for the Base Line. It also feeds Leading Span A, so it shapes the near edge of the cloud.
Slow cloud edge window	52	The window for Leading Span B, the slow edge of the cloud. A longer window makes the cloud move less.
Shift in candles	26	How far the shifted lines move. With 26 the leading lines go 25 candles ahead and the close goes 25 candles back, since the code subtracts one from the number you enter.

How traders read it

Start with the cloud. Price above both leading spans reads as an uptrend, price below both as a downtrend, and price inside the cloud as no clear trend. A thick cloud is a wide gap between the two spans, a thin one a narrow gap. Many readers treat the cloud as support or resistance, since it is built from old highs and lows.

The Conversion Line against the Base Line works like a fast and a slow average. Conversion above Base says the last 9 candles are higher than the 26-candle midpoint. The Lagging Span is the close drawn 25 candles back, so if it sits above the candles of that time, today’s close is higher than the close of then.

The cloud is projected from past data, so what sits to the right of the last candle is not a forecast. It is the spans as they stood 25 candles ago, moved forward.

When it misleads

Ichimoku has five lines and a lot of conventions, which makes it easy to find a reading that fits what you already think. All of it is built from past highs and lows, so it lags, and in a sideways market price keeps crossing the cloud with no trend to follow. The shift counts candles, not hours, so across a weekend on gold the cloud does not stretch in time; it still moves ahead by 25 candles. On a short timeframe the 9, 26 and 52 defaults cover only a few hours, a very different window from the daily chart they were first used on.

Questions and answers

How is the Ichimoku Cloud calculated?

Each line is a midpoint of the highest high and lowest low over a window: 9, 26 and 52 candles. Leading Span A averages the first two. The leading spans are drawn 25 candles ahead and the Lagging Span, the close, 25 candles back.

What is the cloud in Ichimoku?

It is the area between Leading Span A and Leading Span B. Because both are shifted forward, the cloud sits in front of the current price.

Why 25 and not 26 candles?

The shift setting is 26, and the code subtracts one before shifting. That puts the cloud 25 candles ahead and the close 25 candles behind.

Does the Ichimoku shift count weekend hours?

No. It counts candles, and gold has none between the Friday close and the Sunday open. On a 1-hour chart the cloud drawn ahead of a Friday afternoon candle lands on the first candles of the new week, 25 trading hours later.

Related: Donchian Channels, Moving Average Ribbon, Parabolic SAR, MA Cross, every indicator.