Kijun-Sen (Base Line)
What Is the Kijun-Sen (Base Line)?
The Kijun-sen, or base line, is an indicator and important part of the Ichimoku Kinko Hyo method of technical analysis, which is otherwise called the Ichimoku cloud.
The Kijun-sen is the midpoint price of the last 26-periods, and accordingly an indicator of short-to medium-term price momentum. The indicator supports surveying the trend, and can likewise be helpful for distinguishing trading opportunities when combined with different parts of the Ichimoku cloud.
The Formula for the Kijun-Sen (Base Line) is
The most effective method to Calculate the Kijun-Sen (Base Line)
- Find the highest price arrived at over the last 26 periods.
- Find the lowest price arrived at over the last 26 periods.
- Sum these two numbers together and afterward partition by two.
What Does the Kijun-Sen (Base Line) Tell You?
All alone, Kijun-sen shows the midpoint price for the last 26 periods. Like a moving average, when the price is over the base line it demonstrates the price is over the midpoint and in this way short-term price momentum is up. This is additionally confirmed assuming the Kijun-sen line is calculated upwards.
At the point when the price is below the base line, and particularly if Kijun-sen is calculated downwards, that demonstrates price momentum is to the downside as the price is below the 26-period midpoint. While 26-periods is normally utilized for this calculation, this can be altered to suit individual preference. A smaller number of periods, for example, 15, will follow the price all the more closely. A larger number of periods, for example, 45, won't follow the price as closely.
The Kijun-sen is almost consistently utilized alongside the Tenkan-sen (conversion line) to assist with measuring bearing changes in price and to produce trade signals. Tenkan-sen is the 9-time frame price midpoint. Since it is a short-term indicator it tracks price all the more closely and answers faster to price changes. Subsequently, when Tenkan-sen crosses above Kijun-sen it demonstrates that price momentum is picking up steam to the upside. A few traders utilize this as a buy signal. This is a bullish crossover.
- At the point when Tenkan-sen crosses down through Kijun-sen it shows the price is dropping, and a few traders utilize this as a sell signal. This is a bearish crossover.
- At the point when Tenkan-sen and Kijun-sen are entwined or crossing to and fro that means the price is deficient with regards to a trend or moving in a choppy fashion. Crossover signals are not as dependable during such times.
While checking the trend or utilizing crossovers, the data gave ought to be utilized inside the setting of the whole Ichimoku cloud indicator. For instance, on the off chance that the price is over the "cloud", a bearish crossover might in any case be utilized to sell a long position, yet it probably wouldn't be utilized to enter a short position.
The Difference Between Kijun-sen (Base Line) and a Simple Moving Average (SMA)
The Kijun-sen is a midpoint of the high and low price over the last 26-periods. This is certainly not an average. A simple moving average is an average price over a set number of periods, calculated by adding up the closing prices of those periods and afterward partitioning the total by the number of periods.
A 26-period base line and a 26-period SMA will create various values and in this manner give different data to the trader.
The Limitations of Using Kijun-sen (Base Line)
Except if there's a great deal of recent price movement, enough to pull the price away from the 26-time frame midpoint, the Kijun-sen will frequently trade close and converge with the price. On occasions such as these, it's anything but an optimal device for assisting with trend heading. Assuming that the price is crossing the base line over and again, the other Ichimoku indicators are expected to give lucidity on the larger or longer-term trend course.
While some crossover signals with the Tenkan-sen will bring about large and beneficial price moves, others may not. The price might fail to move true to form or the indicator might cross back the alternate way, generating a false signal.
While the Kijun-sen gives some data all alone, it is best utilized related to the next Ichimoku indicators. What's more, traders are likewise urged to utilize price action analysis, other technical apparatuses, and fundamental analysis.
Highlights
- Kijun-sen is normally utilized related to the next Ichimoku indicators.
- Kijun-sen is commonly utilized related to Tenkan-sen (conversion line) — the 9-time frame midpoint price — to create trade signals when they cross.
- Kijun-sen additionally means "base line" and is the mid-point of the 26-time frame high and low.
- At the point when the price is above Kijun-sen then, at that point, short-to medium-term price momentum is up. On the off chance that the price is below Kijun-sen, price momentum is down.
