Kijun Line (Base Line)

What is the Kijun Line (Base Line)?

The Kijun Line, likewise called the Base Line or Kijun-sen, is one of five parts that make up the Ichimoku Cloud indicator. The Kijun Line is ordinarily utilized related to the Conversion Line (Tenkan-sen) to produce trade signals when they cross. These signals can be additionally filtered through different parts of the Ichimoku indicator.

The Kijun Line is the mid-point of the high and low price over the last 26 periods.

The Formula for the Kijun Line (Base Line) is

$\begin &\text{Kijun line (base line)} = \frac{1}{2}*\left( \max_{\left{ t .. t-26\right} } {\left[p\right ]} + \min_{\left{ t .. t-26\right}}{\left[p\right ]} \right)\ &\textbf\ &\max_{\left{ t .. t-26\right} }{\left[p\right ]} = \text{the maximum price over the last 26 periods}\ &\min_{\left{ t .. t-26\right} }{\left[p\right ]} = \text{the minimum price over the last 26 periods}\ \end$

Step by step instructions to Calculate the Kijun Line (Base Line)

1. Track down the highest price over the last 26 periods.
2. Track down the lowest price over the last 26 periods.
3. Join the high and low, then partition by two.
4. Update the calculation after every period closes.

What Does the Kijun Line Tell You?

The Kijun Line, or Base Line, is part of the Ichimoku Cloud indicator.

The Ichimoku Cloud is a technical indicator that characterizes support and resistance, measures momentum, and gives buy and sell signals. Its engineer, Goichi Hosoda, planned the indicator to be a "one look equilibrium chart".

There are several distinct lines remembered for the Ichimoku Cloud indicator.

• Tenkan-Sen — Conversion Line
• Kijun-Sen — Base Line
• Senkou Span A — Leading Span A
• Senkou Span B — Leading Span B
• Chikou Span — Lagging Span

While the "cloud", made up of Leading Span An and B, is the most unmistakable feature of Ichimoku Cloud indicator, the Kijun Line produces trading signals when it is crossed by the Tenkan Line. The Tenkan Line is the 9-period price mid-point, consequently it moves speedier than the Kinjun line which checks 26 periods out.

At the point when the Tenkan Line crosses over the Kijun Line it signals that the short-term price momentum is moving to the upside, and may be deciphered as a buy signal.

At the point when the Tenkan Line crosses below the Kijun Line it signals momentum has moved to the downside and may be deciphered as a sell signal.

Buy or sell signals ought to be utilized inside the setting of different parts of the Ichimoku indicator. For instance, a trader may possibly wish to trade the buy signals on the off chance that the price is likewise over the "cloud" or Leading Span A.

At the point when the Tenkan Line and Kijun Line are crossing this way and that the price comes up short on trend, or is moving in a choppy fashion, and consequently the crossovers won't create solid trade signals.

All alone, the Kijun Line can likewise be utilized for examining price momentum. With the price is over the Kijun line, it means the price is over 26-period mid-point and in this manner has a vertical bias. On the off chance that the price is below the Kijun Line, it is below the mid-point price, and in this manner has a descending bias.

Illustration of a Kijun Line

The following chart shows an illustration of an Ichimoku Cloud indicator applied to the SPDR S&P 500 ETF (SPY).

In the chart over, the Kijun Line is red and the Tenkan Line is blue. After a concise selloff, the Tenkan moved over the Kijun in mid 2016. This was a potential buy signal. The two lines didn't cross again until 2018, which would have given the sell signal. For a large portion of this time, the price remained over the Kijun Line and the "cloud", assisting with affirming the uptrend.

The Difference Between the Kijun Line and a Moving Average

The Kijun Line is a moving mid-point, based on the high and low over a set number of periods. It is calculated by adding the high and low and separating by two. A moving average (MA) is unique. It summarizes the closing prices of a set number of periods and afterward separates that by the number of periods. A 26-period Kijun Line and a 26-period MA will deliver various values, and hence give traders different information.

The Limitations of Using the Kijun Line

Except if there is an extremely strong trend, the Kijun Line will frequently show up close to the price. At the point when the Kijun Line is many times crossing or close to the price, it isn't as valuable for assisting with surveying the trend course.

The equivalent goes for crossovers with the Tenkan Line. At the point when the price trends strongly, crossover signals may be very productive. Yet many crossovers signals will be unfruitful in the event that the price neglects to trend following the crossover.

The Kijun Line is reactionary, in that it shows what price has done in the past. There are no predictive characteristics inherent in the indicator's calculation.

The Kijun Line ought to preferably be utilized related to different components of the Ichimoku Cloud indicator, alongside price action and other technical indicators.

Highlights

• The Base Line is the midpoint price of the last 26-periods.
• At the point when the price is over the Kijun Line it demonstrates the recent price momentum is to the upside. At the point when the price is below the Kijun Line, recent price momentum is to the downside.
• The Kijun Line and Tenkan Line are utilized together to create trade signals.
• The Kijun Line is one of five parts of the Ichimoku indicator.