Ichimoku Cloud reads the market from the midpoints of recent ranges. Each of its averages is not a mean of closes but the average of the highest high and the lowest low over a window, so it follows where price has traded rather than where it closed.
The Conversion Line is the midpoint of the last 9 bars and the Base Line the midpoint of the last 26. Leading Span A is the average of those two lines, and Leading Span B is the midpoint of the last 52 bars. Both leading spans are drawn 25 bars ahead of the bar that computed them, so the cloud between them extends past the newest candle into the space on the right. The Lagging Span is the close drawn 25 bars back.
The cloud is shaded green where Leading Span A is above Leading Span B and red where it is below. With the default offsets the projection matches the classic displacement of 26, counting the current bar as the first.
How to read Ichimoku Cloud
Price above the cloud is usually read as an uptrend and price below it as a downtrend; price inside the cloud is a market without a clear side. The cloud's edges act as support and resistance, and a thick cloud is a stronger barrier than a thin one.
A green cloud ahead of price means the shorter midpoint leads the longer one, a red cloud the reverse, and a change of colour in the projected part is an early sign that the balance is shifting. Many traders also watch the Conversion Line crossing the Base Line, and check that the Lagging Span sits clear of the candles from 25 bars ago before trusting a move. Like every trend tool it lags in a sideways market, where the lines tangle and the cloud flips often.
Settings
- Conversion Line Length
- Bars in the window for the Conversion Line, the fastest midpoint. Shorter lengths react to price sooner.
- Base Line Length
- Bars in the window for the Base Line. It also feeds Leading Span A, which averages the Conversion and Base lines.
- Leading Span B Length
- Bars in the window for Leading Span B, the slowest midpoint and the cloud's longer edge.
- Cloud Offset
- How many bars ahead the leading spans and the cloud are drawn. 25 matches a displacement of 26.
- Lagging Span Offset
- How many bars back the close is drawn, written as a negative number. -25 matches a displacement of 26.
Frequently asked questions
Why are there two offset settings instead of one displacement?
In OpenScript a plot's offset is fixed before the first bar and can take a setting only as its whole value, not a calculation on it. Projecting the cloud forward and the Lagging Span back needs two different numbers, so each is its own setting. The defaults, 25 and -25, give the classic displacement of 26.
Why does the cloud continue past the last candle?
The leading spans are drawn 25 bars after the bar that computed them, so the most recent values land in the space to the right of the newest candle. That projected part of the cloud is known now and does not change as new bars arrive.
Why is the Lagging Span missing on the most recent bars?
It is the close drawn 25 bars back, so the last 25 bars have no close yet to show there.
What do the colours of the cloud mean?
Green where Leading Span A is above Leading Span B, red where it is below. The colour says which midpoint leads, not where price is.
