What is ‘Kijun-Sen’
The Kijun-Sen is a major indicator line and component of the Ichimoku Kinko Hyo indicator, also known as the Ichimoku cloud. It is generally used as a metric for medium-term momentum. The Kijun-Sen line calculation utilizes the following formula:
The Kijun-Sen is almost always used, specifically, in combination with the Tenkan-Sen to generate predictions of likely future price movements. When the Tenkan-Sen line moves above the Kijun-Sen line, a buy signal is created. A sell signal is created, conversely, when the Tenkan-Sen line moves below the Kijun-Sen line. The Kijun-Sen line, along with each individual element of the Ichimoku cloud method, should never be considered in isolation but considered in context with the entire chart.
Kijun-Sen Formula & Calculation
The Kijun-Sen formula is the Highest High plus the Lowest Low divided by two for the previous 26 periods. The fomula calculation is represented as (Highest High + Lowest Low) / 2.
The Ichimoku cloud method was developed and published in 1968 by Goichi Hosoda, a Tokyo newspaper writer, along with a number of assistants running various calculations. While this method is intimidating to many traders, due to the various lines created once applied, it is readily utilized by Japanese trading rooms as it provides a variety of tests on price action and allows for higher probability trades. There are four major components of this method.
The Tenkan-Sen, as indicated earlier, is most commonly used in conjunction with the Kijun-Sen to generate buy and sell signals. The formula for its calculation takes the highest high and the lowest low and divides it by two. It is calculated over the past seven to eight time periods.
The Kijun-Sen is typically viewed as a trigger line for traders that implement the Ichimoku cloud method. Its calculation is identical to that of the Tenkan-Sen, except for the fact it accounts for the past 22 time periods, allowing for a much more accurate gauge on long-term momentum.
Senkou Span A
This span refers to the sum of the Tenkan and the Kijun, divided by two. This calculation is plotted ahead of current price movement by 26 time periods.
Senkou Span B
This span is the sum of the highest high and lowest low, divided by two. The calculation is taken for the past 52 time periods and, like span A, is plotted ahead 26 time periods.
After being plotted, the space between the Tenkan and Kijun is called the kumo, or cloud. This cloud is substantially thicker than general resistance and support lines and provides traders a much more thorough filter. The cloud typically accounts for volatility. When a line breaks through the cloud and movement follows, either above or below, a better trade is suggested.
Kijun Sen FAQ
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- Short-term foreign exchange rate trading based on the support/resistance level of Ichimoku Kinkohyo – ieeexplore.ieee.org [PDF]
- Buying stock market winners on Warsaw Stock Exchange-quantitative backtests of a short term trend following strategy – ieeexplore.ieee.org [PDF]
- The profitability of Ichimoku Kinkohyo based trading rules in stock markets and FX markets – onlinelibrary.wiley.com [PDF]
- Can the Leading Us Energy Stock Prices Be Predicted Using Ichimoku Clouds? – papers.ssrn.com [PDF]