Ichimoku Kinko Hyo

A chart system developed in Japan and published in the late nineteen sixties, whose name is usually rendered as one glance equilibrium chart. Five lines are drawn. The conversion line and the base line are short and medium term midpoints of price. Two leading spans are plotted ahead of the current bar and the band between them is the cloud, which is the feature the system is known for. A lagging span plots the closing price back in time. The system was designed as a whole, and the individual lines carry much less meaning read on their own.

The lines are midpoints, not averages. Each is the highest high plus the lowest low over its lookback, divided by two, so the calculation tracks the centre of the range a market has actually traded in rather than the average of its closing prices. The first leading span is the midpoint of the conversion and base lines, the second is the same midpoint calculation over a much longer lookback, and both are shifted forward by the medium term period. That forward shift is what gives the cloud its shape: its thickness is the disagreement between a short and a long measure of the range.

The displacement is what most often trips people up. The cloud drawn to the right of the last bar is not a forecast, it is old arithmetic moved forward, and the lagging span means the most recent readings are structurally incomplete until the chart catches up with them. The published periods were set for a Japanese market that then traded a six day week, and practitioners disagree openly about whether they should be shortened for markets quoted around the clock, with one camp holding that the numbers are arbitrary and another that changing them breaks the internal proportions the system depends on.