In terms of more minor signals, a move of the base line above the conversion line or lagging span is considered bearish. In uptrending markets, the lagging span will be above the conversion line, which will be above the base line, which will be above the Ichimoku cloud (both leading span A and leading span B).ĭuring downtrending markets, the Ichimoku cloud will be above the base line, which will be above the conversion line, which will be above the lagging span. In trending markets one way or the other, the base line will be the middle line. What happened in the very recent past is statistically more likely to be more relevant to the present and future than something further in the past. An uptrend calculated from an average of more recent data is inherently stronger than an uptrend calculated from an average of less recent data. Namely, it relies on 9 days of price data versus 26 days of price data. Why? Because the conversion line is based more heavily on recent price activity relative to the base line. Conversely, a cross of the conversion below the base line is interpreted as a mildly bearish signal. The cross of the conversion line above the base line / kijun line is interpreted as a mildly bullish signal. In a strongly uptrending market, the conversion will generally be the second-highest line, below the lagging span. Any time the lagging span crosses down over a line, this is interpreted as bearish. More generally, any time the lagging span crosses up over a line, this is interpreted as bullish.
If it crosses over the conversion line to become the lowest line on the chart, this is a bearish signal. If the lagging span crosses over the conversion/tenkan line (red line in above images), in particular, to become the highest line on the chart, this is interpreted as an especially bullish signal. If the trend has been distinctly down over the past 26 days, then this will generally make it the lowest line on the chart. When the trend over the past 26 days is decidedly up, this generally has the effect of making this line the highest up on the chart due to the fact that it’s been shifted back. In other words, if you take price and shift it back 26 days (in the case of using the daily chart), that represents exactly what this line is. The lagging span line represents the price from 26 days (or periods) ago. We’ll go through each of these lines one by one: Lagging Span / Chikou Span Leading Span B, or Senkou Span B (royal blue line).Leading Span A, or Senkou Span A (yellow line).A base line, translated as the Kijun Line (white line)Īnd two lines that make up the Ichimoku cloud, the colored space existing between them:.A conversion line, translated as the Tenkan Line (red line).A lagging span, translated into Japanese as the Chikou Span (teal line in chart below).The Ichimoku cloud may at first seem intimidating and make the chart look closer to a piece of abstract art, but is relatively straightforward once acquainted with its interpretation. The Ichimoku cloud involves five different indicators and is designed to give insight into the trend of the market.
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