Trading The Cloud - The Tenken Sen The Tenken Sen

[Welcome to part seven of my ichimoku trading guide. In this post I want to start talking about the 'Tenken Sen'.The Tenken Sen is recognised by the 'red' line on 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 highest high and the lowest low' for the last 9 periods instead of just the 'average closing 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, this not only better represents price equilibrium but provides a more accurate gauge of support then the SMA line.

By using the averages of price extremes (high and lows) over the 9 periods, the Tenken Sen gives us a better measure of equilibrium rather then merely using an average 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 a trendless situation over the last 9 periods (9 candles) The Tenken Sen can also provide a much more accurate level of price support then the 9 period SMA Take a look at this

As you can see, the Tenken price broke through the 9 period SMA, but didn't manage to break past the Tenken Sen. This is to do with the more conservative way the Tenken Sen is calculated which makes it less reactive to small movements in the price.

Finding momentum.

The angle of the Tenkan Sen can give us some idea on how price has built up momentum over the past 9 periods (past 9 candles). If the Tenken Sen had a steep angle it means price has been moving with some good strong momentum, whereas a flat or relatively straight Tenken Sen indicates 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 the two, the Tenken Sen is the fastest because it measures trend over the past 9 periods as opposed to the Kijun sen which measures trend over 26 periods. Given the short term nature of the Tenken Sen it can't be used as a reliable indicator of trend on its own, although price breaking the Tenken Sen can give an early indication of a trend change, we should always make sure it is confirmed by the other ichimoku components before we make our trading decision. However one of the main uses for the Tenken Sen is when used in relation with the 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 and teaching you about the various trading strategies in ichimoku.

Thats the basics of the Tenken Sen covered,in my next lesson I will be covering my favourite part of the ichimoku indicator, the Kijun Sen. See you next time Chris (admin)