Ichimoku consists of five calculations plotted simultaneously. Tenkan-sen (Conversion Line): the midpoint of the 9-period high-low range. Kijun-sen (Base Line): the midpoint of the 26-period high-low range. Senkou Span A (Leading Span A): the average of Tenkan-sen and Kijun-sen, plotted 26 periods ahead. Senkou Span B (Leading Span B): the midpoint of the 52-period high-low range, plotted 26 periods ahead. Chikou Span (Lagging Span): today's closing price plotted 26 periods behind current price. The cloud (Kumo) is the area between Senkou Span A and Senkou Span B.

The default parameters (9, 26, 52) were calibrated for Japanese markets where weeks were 6 trading days. For modern 5-day trading weeks, some practitioners adjust to (10, 30, 60) or keep the original settings. The academic debate on parameter adjustment is inconclusive — many experienced Ichimoku practitioners prefer the original settings for consistency with published research and the global community of users watching the same levels.

The cloud's color and position define the primary trend. Price above a green cloud (Senkou Span A > Senkou Span B) is bullish. Price below a red cloud (Span A < Span B) is bearish. Price within the cloud is neutral/transitional. The cloud's thickness indicates the strength of support or resistance — a thick cloud is a stronger barrier than a thin one. Future cloud color and width provide advance warning of changing market structure: a cloud color flip from red to green in the future (visible 26 periods ahead) signals improving conditions.

The Kijun-sen (26-period Base Line) is the most important line for support/resistance after the cloud itself. In an uptrend, pullbacks to the Kijun-sen frequently provide entry points. A Tenkan/Kijun cross (Tenkan crossing above Kijun) is a trend signal analogous to a moving average crossover, but filtered by the cloud position: Tenkan crossing above Kijun while price is above the cloud is a strong bull signal; the same cross while price is inside or below the cloud is a much weaker signal requiring additional confirmation.

The Chikou Span (today's close plotted 26 periods in the past) reveals whether current price strength is confirmed by the historical context. A Chikou Span trading above the price bars from 26 periods ago confirms that the market is stronger than it was at that point — a bullish sign. A Chikou Span below those historical bars signals bearish confirmation. The strongest Ichimoku signals occur when all elements align: price above cloud, cloud green, Chikou Span above historical prices, and Tenkan above Kijun — the 'Perfect Buy' setup in Ichimoku terminology.

The system is most effective as a trend-following tool in directionally moving markets. In choppy, sideways markets, the five lines compress and create congestion, generating many false signals. Experienced Ichimoku practitioners first identify the trend context using the cloud on a weekly chart before executing signals from daily chart crossovers. This multi-timeframe alignment is the most important discipline when applying Ichimoku to avoid the confusion that its visual complexity can create for new practitioners.