Trading The Cloud - The TenkenSenThe Tenken Sen[Welcome to part seven of my ichimoku trading guide. In this post I want to starttalking about the Tenken Sen. The Tenken Sen is recognised by the red lineon the ichimoku indicator, it translates in Japanese as the Conversion line.Some traders like to compare the Teken Sen to a simple 9 period moving average(SMA),however this is not 100% correct.The reason for this is that the Tenken Sen measures the price average highesthigh and the lowest low for the last 9 periods instead of just the averageclosing price which an SMA shows us.
You will notice that the SMA is much more smoothed and has less straight edges,the Tenkou Sen however has jagged edges and straight flattened portions, thisnot only better represents price equilibrium but provides a more accurategauge of support then the SMA line. By using the averages of price extremes (high and lows) over the 9 periods, theTenken Sen gives us a better measure of equilibrium rather then merely using anaverage of the closing price (SMA).
So what does it mean when the Tenken Sen is flat?When you see the Tenken Sen flatten out, it generally means there has been atrendless situation over the last 9 periods (9 candles) The Tenken Sen can also provide a much more accurate level of price supportthen the 9 period SMA Take a look at this As you can see, the Tenken price broke through the 9 period SMA, but didntmanage to break past the Tenken Sen. This is to do with the more conservativeway the Tenken Sen is calculated which makes it less reactive to smallmovements in the price. Finding momentum. The angle of the Tenkan Sen can give us some idea on how price has built upmomentum over the past 9 periods (past 9 candles). If the Tenken Sen had a steep angle it means price has been moving with somegood strong momentum, whereas a flat or relatively straight Tenken Senindicates low or no movement at all over the same time period.
Just like the Kijun Sen, the Tenken Sen measures the short term trend, out of thetwo, the Tenken Sen is the fastest because it measures trend over the past 9periods as opposed to the Kijun sen which measures trend over 26 periods.Given the short term nature of the Tenken Sen it cant be used as a reliableindicator of trend on its own, although price breaking the Tenken Sen can give anearly indication of a trend change, we should always make sure it isconfirmed by the other ichimoku components before we make ourtrading decision. However one of the main uses for the Tenken Sen is when used in relation withthe Kijun Sen.
If the Tenken Sen is above the Kijun Sen, then we have a bullish trend If the Tenken Sen is below the Kijun Sen, then we have a Bearish trend. But the real power happens when the Kijun Sen and Tenken Sen crossover,this is actually a trading signal on its own and one of the most powerful trading
signals in ichimoku, I will cover this in future posts when I start talking andteaching you about the various trading strategies in ichimoku. Thats the basics of the Tenken Sen covered, in my next lesson I will be coveringmy favourite part of the ichimoku indicator, the Kijun Sen. See you next timeChris (admin)