The Ichimoku Cloud was created by Goichi Hosada in 1969. It has components of trend and momentum indicators and is compound by five lines.

It includes several moving averages of which two create the so-called cloud. The cloud is the key component of this indicator, and all the entry and exit points will depend on it.

The Ichimoku Cloud has different applications. The most common one generates buys and sells when the price crosses the cloud up and downwards.

When a candle breaks the cloud upwards and closes above it, the price is gaining bullish momentum and generates a buy signal. Likewise, if the price breaks the cloud downwards and closes below it, the price is likely to fall. Therefore it will close a position or open a short.