Ichimoku Cloud Breakout (Trend)

Ichimoku Kinko Hyo: buys when price closes above the cloud — the pair of spans projected 26 bars ahead of the market that built them — and sells when it closes back below the cloud.

How It Works

1. Build the cloud from the bar extremes: midpoints of the 9-, 26- and 52-bar high-low ranges become the conversion line, base line and Span B, and the two spans are projected 26 bars ahead.
2. Buy when the close rises above the top of the cloud — price has cleared the entire band the market built a month ago, which is Ichimoku's definition of a bullish regime.
3. Sell when the close drops below the bottom of the cloud. Inside the cloud the strategy simply holds: that zone is explicitly treated as undecided, not as a signal.

Worked example. The cloud spans 98 to 102 and price closes at 103, clearing the top, so the strategy buys. Price runs to 130 and later sinks back; when it closes at 117 with the cloud then spanning 118-124, it has fallen through the bottom and the trade closes.

The Math Behind The Indicators

Everything runs on closing prices of the traded timeframe: P is a close, P_t today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.

Ichimoku Cloud (Kumo)

A whole trend framework in one overlay. The conversion and base lines are midpoints of the 9- and 26-bar high-low ranges — range centres, not averages of closes. Their midpoint becomes Span A and the 52-bar range midpoint becomes Span B, and both are then drawn 26 bars into the future. The band between them is the cloud. Price above the whole cloud is the bullish regime, below it the bearish one, and the cloud's thickness shows how wide the old range was — a thick cloud is harder to break out of. Nothing here peeks ahead: a bar simply compares itself against a band the market drew 26 bars earlier.

\[\mathrm{Conv} = \dfrac{\max(H_9) + \min(L_9)}{2}, \quad \mathrm{Base} = \dfrac{\max(H_{26}) + \min(L_{26})}{2}, \quad \mathrm{Span\,A} = \dfrac{\mathrm{Conv} + \mathrm{Base}}{2}\]

Example: If the 9-bar range is 95–105 the conversion line is 100, and a 26-bar range of 90–110 puts the base line at 100 too, so Span A is 100. With the 52-bar range at 80–120, Span B is also 100 — a pinched cloud, meaning the market has coiled and a breakout either way meets little resistance.

Example Chart

Real Data55/ 100Composite score

Metrics Per Trade

Final Metrics

Scores

Resampled Data58/ 100Composite score

Metrics Per Trade

Final Metrics

Scores