When placed on a chart using default settings, the Ichimoku can seem a complex and daunting indicator. So how come it’s one of my favourite indicators?
Well, it’s because the Ichimoku is actually many indicators in one, each trying to show a different aspect of the market: trend, momentum and volatility. And the one part of the Ichimoku I like the most is the baseline indicator, aka the Kijun-sen.
The Kijun-sen Baseline Indicator
If you are a trend trader, one of the most important things you need to know is the baseline of the trend, the line that shows you the direction of the trend, when there are pullbacks, etc. One example of such a baseline is the humble moving average, used by many traders either as a direct comparator to price or by using two or more moving averages as a cross-over-indicator. The MACD, for example,is simply a measure of the distance between two moving averages. MACD is an abbreviation of Moving Average Convergence Divergence.
Back to the Kijun-sen, this is a 26 period average of the Period High and Low or: (26PH + 26PL)/2. So, since it’s an average, how does this differ from a moving average. The image below shows the 26-period Kijun-sen compared to a 26-period simple moving average (26SMA).
Hopefully, you can see how both these indicators show the underlying trend, but there are differences. The Kijun-sen appears to track better in a fast moving trend (useful for trailing stops) and it also tends to flatten out when the trend has faded. e.g. a flat Kijun-sen implies a ranging market.
JagzFX PIN Ichimoku MTF: Settings
This PIN was developed for the parts of Ichimoku I find most useful for my trading. That’s mainly comparing the price to the Kijun-sen and to a lesser extent to the Tenken-sen and Senkou-Span. I do like the way that the Kijun-sen appears to flatten out when the price is ranging, and that might become a feature in a future update.
If you have used my other MTF PINS then the settings should be obvious, you can select which time-frames to include in the MTF filter (M1 thru W1), select which of the Ichimoku indicator lines to compare and, should you really want to, you can adjust the indicator periods.