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Trading the cloud - Kijun Sen

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The Kijun sen is one of the most "hardest working" lines in ichimoku, it just keeps giving us vital clues almost constantly throughout the day.

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Trading the cloud - Kijun Sen

  1. 1. Trading the Cloud - Kijun SenNow its time to talk about one of the true masters of the ichimoku indicator - TheKijun Sen.The Kijun sen is one of the most "hardest working" lines in ichimoku, it just keepsgiving us vital clues almost constantly throughout the day, this is why without adoubt, its my favourite part of ichimoku indicator. Just like its brother, the tenken sen, the Kijun Sen measures the average ofprices highest high and lowest low, however it does this over a longer timeframe of 26 periods as opposed to the tenkan sens 9 periods.         
  2. 2.  The Kijun Sen provides us with all the information the Tenken Sen does, just on alonger time frame.Because the Kijun Sen measures the longer time period, it is more reliable when itcomes to measuring short term price setiment and strength then that of the  TenkanSen. If price has been ranging, then the Kijun Sen will flatten out
  3. 3.  This is a great tool to use when your deciding whether to stay out of a trade or not.If price has been trading between the most recent highest highs and lowest lows andhas not really decided on a direction (ranging) then the Kijun tells us to not totrade by flattening out.The good news is, the Kijun Sen tells us when we can start to look for signalsagain, by angling either up or down, this means the short term trend can bemeasured by the direction of the Kijun Sen.Also the angle of the Kijun Sen can show us the strength and momentum of trend,the greater the angle the stronger the trend. Let me show you an example. 
  4. 4.  Another aspect that is expressed more accurately in the Kijun Sen then that in theTenken Sen is price equilibrium, this is because of the longer time period the KijunSen considers.Because of this, we can heavily rely on the Kijun Sen to show us significant levelsof support and resistance. 
  5. 5. The elastic band effect Because the Kijun Sen has such a strong expression of equilibrium, price tends tomove away and back towards the Kijun Sen. This is most noticeable when pricemomentum is extreme and price is moving up and down rapidly over a short periodof time.Some traders call this the rubber band effect, this is where the Kijun Senattracts price towards itself bringing it back to the equilibrium, its like the Kijun Senis a strong magnet and price is always attracted back to it. This happens most when the Kijun is flat or trendless as seen below.
  6. 6.  As you can see from the chart above, price starts to move away from the Kijun Senbut soon changes direction and pulls back towards the flattened Kijun Sen. Because of these different dynamics, the Kijun Sen can not only be usedas a low risk entry point but also as a solid stop loss. You will see in future posts how we can utilise the power of the Kijun Sen and createsome highly profitable strategies and methods, but for now I will end the lessonshere. ThanksChris(admin)

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