Ichimoku Cloud Breakout Long: How to Trade It

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What it is and when it applies

This page helps you decide whether to buy the first decision-timeframe close above the Ichimoku cloud, or to pass. The long needs the Kijun-sen, the Chikou span and the cloud ahead to agree with the close. The stop sits at the Kijun-sen, and its distance sets the size.

On the chart, price has spent time below or inside the cloud, and one candle now closes above the cloud's top edge and above the Kijun-sen. All lines use this manual's house settings, Ichimoku Cloud (20, 60, 120, 30), not the platform default.

The belief is that a close above the midpoints of the last 20, 60 and 120 candles marks a market leaving a range upward. It is a belief, not a rule. Price can close back inside the cloud on the next candle, and this page cites no test of how often a first close above the cloud continues. The checks below also overlap: the Kijun-sen, the Chikou span and the cloud colour all rise because price rose, so they count as one reason and a filter. The context chart and any marked resistance band are the separate kinds of reason.

It fits a market that has been trending or has just turned up. It does not fit a range, where the Kijun-sen and the cloud are flat, or a chart where price is already far above the Kijun-sen. The page deliberately skips an early breakout out of a long range while both lines are still flat, and waits until one of them has started to move.

Before you enter

The long is wrong if a candle closes below the Kijun-sen. The breakout has then given back its move to the middle of the 60-candle range. The stop order goes at the Kijun-sen's value on the trigger candle minus a buffer, so a wick through the line while the idea is alive does not end the trade. The examples assume a buffer of 0.5 x ATR(14), the manual's usual convention and not a rule. A wider buffer takes a bigger move to reach and shrinks the position, and a tighter one does the reverse. Stop-loss placement explains the level, the close and the order.

This manual's house constraints are a planned loss of 1-2% of the account per trade and a 3x maximum leverage. They are choices, not a recommended allocation, and less, or no position, is always allowed. Sizing inputs:

Account risk: the planned loss in cash, 1-2% of equity or lower.
Entry price: the assumed fill, near the trigger candle's close.
Stop price: the Kijun-sen on the trigger candle minus the buffer.
Cost allowance: a per-unit amount for fees and slippage, added to the stop distance, plus funding for the planned hold. The examples assume 0.3 per unit, an illustrative figure (trading costs and liquidity covers it).
Leverage cap: the leverage setting, and all open position values plus this one over account equity, 3 or less.
Liquidation distance: the ticket's estimated liquidation price, below the stop for a long. If the gap is not wide, lower the leverage setting.

Units = planned loss / (entry minus stop, plus allowance), rounded down (position sizing has the sum). Units x (distance + allowance) is the planned loss if the stop fills at its price. A gap, slippage or funding can make the realised loss larger.

For arithmetic only, assume a 10,000 account, a planned loss of 1%, or 100, and ATR(14) of 2, so the buffer is 1. A 4-hour candle closes at 105 above a cloud top of 102. The Kijun-sen is 100, so the stop is 99. Entry at 105 is 6 from the stop, 6.3 with the allowance. The size is 100 / 6.3, about 15.9, so 15 units (assume whole units), worth 1,575, or 0.16 of the account. The planned loss with costs is 15 x 6.3 = 94.5, and costs are about 5% of it.

A sizing diagram: a stop distance of 6.3 per unit made of a 1 buffer, 5 to the entry and 0.3 costs, giving 15 whole units from 15.9, and a planned loss of 94.5 under the plan of 100. — Illustration, not real price data. Hypothetical sizing. The stop sits 1 below the Kijun-sen of 100, so a unit risks 6.3 with costs. 100 / 6.3 rounds down to 15 units, and 15 x 6.3 = 94.5 stays under the planned 100.

Conditions

Each of these must be checkable on the chart. The thresholds marked as assumed are house choices that you write down before the trade.

The first close above. The trigger candle closes above the top edge of the cloud under it, and the candle before it closed at or below the top edge of the cloud under that candle.
A clean first close. None of the 5 candles before the trigger traded above the top edge of the cloud under it by 0.5 x ATR(14) or more, using each candle's own cloud and ATR (assumed). A candle that already pushed out makes "first" unclear.
Above the Kijun-sen. The trigger close is above the Kijun-sen on that candle.
Chikou span clear. The trigger close is above the high of the candle 30 back.
Cloud ahead not red. Span A is at or above span B on the latest candle.
Not a range. The Kijun-sen and the cloud's top edge are not both flat. Flat means the value now differs from its value 10 candles earlier by less than 0.5 x ATR(14) at the latest candle (assumed).
Not stretched. The trigger close is no more than 3 x ATR(14) above the Kijun-sen (assumed). Farther out, the stop distance grows and the price has left the line.
Context chart. On the chart above yours (assume the daily), price is not below its own cloud. Write the conflict rule first, as multi-timeframe analysis sets out.
Room. If a marked resistance band sits overhead, the reward to it after costs passes a test you wrote before the trade. If nothing is marked overhead, the exit rule below is the plan (support and resistance covers a chart with no level above).

Two schematic rows of the 5 candles before the trigger, a cloud top at 102 and a line at 103. In one none reaches 103, a clean first. In the other one does: pass. — Illustration, not real price data. Schematic candles. With the cloud top at 102 and ATR(14) at 2, none of the 5 candles before the trigger may reach 103. If one has, it already pushed out, and the first close is unclear.

Reasons to pass

Passing is a valid result. Pass when:

the Kijun-sen and the cloud are both flat
the trigger close is more than 3 x ATR(14) above the Kijun-sen
an earlier candle already pushed out of the cloud, so the first close is unclear
the close is only above the cloud, with the Kijun-sen or the Chikou span not agreeing
the cloud ahead is red
the size the stop allows is below the exchange minimum, or costs come to more than one fifth of the planned loss
a marked resistance band sits just above entry and the reward fails your written test

A price scale: Kijun-sen 100, stop 99, limit 106 at 3 x ATR. A close at 105 is 2.5 x ATR up, sized at 15 units. A close at 108 is 4 x ATR up, 10 units: pass. — Illustration, not real price data. With ATR(14) at 2, the limit is 106. A close at 105 is 2.5 x ATR above the Kijun-sen: 15 units. A close at 108 is 4 x ATR above, with a stop 9 away: pass.

Entry

Entry on the first close

The trigger is the trigger candle's close, so wait for the candle to finish. Place a limit order at or just below that close, or a market order if getting in matters more than the fill price. A limit order expires after 3 candles (assumed). The stop is a reduce-only stop-market sell at the Kijun-sen's value on the trigger candle minus the buffer. A stop-limit caps the fill price but can sit unfilled in a gap (order types explains).

A schematic candle chart: the cloud top at 102, a rising Kijun-sen at 100, and a trigger candle closing at 105 above both. Entry is 105 and the stop is 99, 1 under the Kijun-sen. — Illustration, not real price data. Hypothetical levels on schematic candles. The trigger candle closes at 105, above the cloud top at 102 and the Kijun-sen at 100. Entry is near 105 and the stop is 99, the Kijun-sen less a buffer of 1.

Execution assumptions

Assume a limit order that fills at its price, 0.3 per unit for fees and slippage, and a stop-market that fills at the next available price. If price runs away without a fill, do not chase: the stop stays at the Kijun-sen, so the distance grows with every candle you wait. Cancel the order if a candle closes back at or below the cloud's top edge before it fills.

Hypothetical walkthrough

Hypothetical walkthrough. Invented prices and an invented outcome, chosen to teach the decision. Not a recorded trade, and not evidence of how often this setup works.

The reader writes the plan before the close: if a 4-hour candle closes above the cloud top of 102 and above the Kijun-sen of 100, with the Chikou span clear and span A above span B, buy near the close with the stop at 99. A close at 105 passes every test: it is 2.5 x ATR(14) above the Kijun-sen, the Kijun-sen rose 3 over the last 10 candles, and none of the 5 earlier candles reached 103. The size is 15 units and the planned loss with costs is 94.5.

Now change one fact. The candle closes at 108. That is 4 x ATR(14) above the Kijun-sen, past the 3 x limit. The stop would be 9 below the close, 9.3 with the allowance, and 100 / 9.3 gives 10 units. The size is the smaller issue. The close has left the line, so the page says pass. The outcome was chosen to show a clean trigger ending in a pass because price was already stretched.

Exits

Stop. Keep the reduce-only stop-market at the Kijun-sen on the trigger candle minus the buffer until the exit rule moves it. A decision-timeframe close below the Kijun-sen means the idea is wrong: close by hand and cancel any unfilled orders.

The exit. This page uses one exit, written before entry: close the position on a decision-timeframe close below the Kijun-sen. The Kijun-sen is already on the chart and set the stop, so the stop and the exit share a reference. After each close, move the backstop order to the Kijun-sen's value on that candle minus the buffer. It only moves toward price, and the Kijun-sen is flat when no new 60-candle extreme prints, so it steps up in stages.

For arithmetic only, with the 15 units above, each result is 15 x (backstop - 105 - 0.3), and R is 94.5.

Kijun-sen	Backstop order	Net result if it fills there	R
100	99	-94.5	-1.00
103	102	-49.5	-0.52
105	104	-19.5	-0.21
108	107	+25.5	+0.27
112	111	+85.5	+0.90

The rows are a ladder of stop positions, not a forecast that price climbs. A 60-candle Kijun-sen lags a fast advance, so the exit can sit well below the high, and the trail gives back part of the open gain. There is no fixed target. Read taking profit for the other schemes, and pick one before entry.

Five horizontal bars, one per Kijun-sen level, showing the net result if the backstop fills there: minus 94.5 at a backstop of 99, then minus 49.5, minus 19.5, plus 25.5 and plus 85.5 as it steps up to 111. — Illustration, not real price data. Hypothetical ladder of stop positions, not a forecast. With 15 units from 105, a backstop at 99 loses 94.5, or 1 R. As the Kijun-sen steps up, a backstop at 111 nets 85.5 if it fills there.

Common pitfalls

Buying the first poke. A wick above the cloud is not a close. Wait for the candle to finish.
Counting the checks as separate reasons. The Kijun-sen, the Chikou span and the cloud colour overlap. Weigh the context chart and the overhead levels separately.
Chasing a stretched close. A close far above the Kijun-sen has a wide stop and a small position. Pass.
Moving the stop up to the high. The Kijun rule moves it. Tightening beyond it changes the plan after the fact.
Trading a flat chart. A flat Kijun-sen and cloud mean a range. Wait.

What this cannot tell you

Whether this close is the start of a move or a one-candle poke. The first close above the cloud looks the same either way until later candles print.
How far price runs. The Kijun-sen exit follows price at a distance. It gives no target and no estimate of reach.
Whether a cloud ahead will stop price. It is past data shifted forward, not a resistance at that future price and time.
Whether the order fills while the trigger still holds. A candle can close back inside the cloud before a limit order fills.
Where the stop fills. A fast market can fill it past the line and make the realised loss larger than the planned loss.

Questions

Why use the Kijun-sen for the stop and not the cloud's top edge?

The edge is the other candidate, and a close back inside the cloud is a fair sign of a failed breakout. In the example the Kijun-sen (100) sits below the cloud's top edge (102), so a close back inside the cloud does not end the trade, and the stop is 2 further out than an edge stop would be. An edge stop at 101 would sit 4 from entry, 4.3 with the allowance, and size to 23 units. When the Kijun-sen sits above the edge, it is the nearer stop. This page uses the Kijun-sen in both cases so the stop and the exit share one line, and accepts the wider distance and smaller size or a pass.

A price scale with entry 105, cloud top 102 and Kijun-sen 100. A stop at 101 is 4 away and sizes to 23 units. The Kijun-sen stop at 99 is 6 away and sizes to 15. — Illustration, not real price data. A stop under the cloud's top edge sits at 101, 4 from entry. The Kijun-sen stop at 99 is 2 further out, 6 from entry. The same planned loss buys fewer units: 15 against 23, with 0.3 costs.

Why not the Chandelier trend ride for the exit?

It is a fair alternative. Riding with the Chandelier Exit adds a second set of settings, and this page keeps the exit to a line already on the chart. This page cites no test of either exit.

Does the cloud need to twist green first?

No. The condition is that the cloud ahead is not red, meaning span A is at or above span B. A cloud that twisted green recently and one that has been green for weeks both pass.