While it’s referred to as an indicator in its own right, the Ichimoku Cloud is actually a combination of indicators based on five formulas that combine to form an equilibrium chart. 

These five formulas provide a data-rich indicator that displays lines of support and resistance, trend direction, and momentum of that trend through the charting of several different moving averages on the same chart. Here’s a quick guide to understanding the Ichimoku Cloud and tips to get started using this indicator as part of your trading process.

When it comes to trading, it is widely accepted that there are two main approaches to your analysis of potential trades.  They are fundamental analysis and technical analysis.

Technical analysis is widely used by private traders and is becoming more and more popular.  It involves the study of a financial product’s actual price, to form an opinion on the likely future direction in which the price will move.

Price movements in the forex market may be hard to predict, but they aren’t entirely random, either. There is logic behind the way currency pairs rise or fall in value, and decades of forex trading have revealed that this logic can often be identified—and then predicted—through the use of technical indicators.

Technical indicators come in many shapes and sizes, and no specific indicator is viewed as a required tool for assessing potential forex trades. As traders gain experience and learn about the different technical indicators at their disposal, they end up developing a preference for specific indicators that align with their trading strategy and prove to be reliable over time.

These technical indicators can be broken down into three broad categories.