What is 'Tenkan-Sen'

Tenkan-sen, or conversion line, crates a moving average of the highest and lowest prices of a security over the past nine periods. The tenkan-sen appears in the Ichimoku cloud equilibrium chart, which is used to present both support and resistance information in a single view for technical analysts.


The following formula generates the tenkan-sen:


Breaking Down 'Tenkan-Sen'

The tenkan-sen shows a security’s short-term price momentum and, when read against a longer-term momentum indicator, yields a prediction of future price movement. For example, if the tenkan-sen moves above the kijun-sen, a 26-period average of the highest high and lowest low, many investors take it as a buy signal. Conversely, the tenkan-sen’s moving below the kijun-sen yields a sell signal.

Because the tenkan-sen covers a shorter time period, it tracks price equilibrium with greater sensitivity than the kijun-sen. On the Ichimoku cloud chart, it may show movement where the kijun-sen does not.

The tenkan-sen values also have a part in generating senkou span A, one bound of the kumo, or cloud, the primary element of the Ichimoku cloud chart. The edges of the kumo indicate support and resistance points, and the thickness of the kumo indicates price volatility. The thicker the kumo, the stronger the support and resistance. The general movement of the kumo comports with bearish or bullish price movement.

The Ichimoku Cloud Chart

The Ichimoku cloud chart, or Ichimoku Kinko Hyo chart, is a more detailed version of a candlestick chart developed by Japanese journalist Goichi Hosoda and promoted to the public in 1969. The Ichimoku combines a typical candlestick chart with five additional lines that measure movement and volatility, creating a holistic technical view.

Though it’s more complex than the standard candlestick chart, the Ichimoku’s intention is to yield information more quickly. Ichimoku Kinko Hyo translates roughly as “at-a-glance equilibrium chart,” suggesting that the Ichimoku offers investors everything they need to find an ideal entry point for a security in one easy-to-interpret graphic. The Ichimoku favors running measures of a security’s equilibrium, the average of recent price extremes, over moving averages for predicting short-term price movement. The product of three decades of development the Ichimoku is easier to read and interpret than it is to fully understand.

The tenkan-sen, like all equilibrium-measuring lines on the Ichimoku, will flatten out when the price of a security is consolidating. The nine-period moving average, on the other hand, will almost always continue to move. That means that an investor who looks only at the nine-period moving average will miss signals of equilibrium and volatility that reveal more useful information about short-term price momentum, or so the Ichimoku argument goes.

  1. Line Chart

    A line chart connects a series of data points with a line and ...
  2. Signal Line

    Signal lines are used in technical indicators, especially oscillators, ...
  3. Vertical Line Charting

    Vertical line charting is a type of chart used for plotting and ...
  4. Simple Moving Average - SMA

    A simple moving average (SMA) is an arithmetic moving average ...
  5. Moving Average - MA

    A moving average (MA) is a technical analysis indicator that ...
  6. General Equilibrium Theory

    General equilibrium theory studies supply and demand fundamentals ...
Related Articles
  1. Trading

    Introducing Ichimoku Charts in Forex Trading

    Discover how the high-flying application of Ichimoku charts can be used in forex trading.
  2. Trading

    Simple Moving Averages Make Trends Stand Out

    The moving average is easy to calculate and, once plotted on a chart, is a powerful visual trend-spotting tool.
  3. Trading

    MACD: A Primer

    Learn to trade in the direction of short-term momentum.
  4. Investing

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  5. Trading

    Trend-Spotting With The Accumulation/Distribution Line

    The A/D line highlights buying and selling pressure to confirm existing trends.
  6. Trading

    3 Charts That Suggest Financials Are Headed Higher

    Bullish patterns have emerged on the chart of a key financial ETF and several of its top holdings.
  7. Investing

    The top technical indicators for commodity investing

    Learn how traders can use "the usual suspects" standard for trend trading when it comes to choosing indicators for commodities investing.
  8. Trading

    3 Charts That Suggest Financials Are Headed Higher

    Nearby support on the charts of charts of key financial ETFs suggests that this will be the sector to watch in the weeks and months ahead.
  1. What's the difference between bottom-line and top-line growth?

    Both the top line and bottom line are critical to investors when analyzing a company's revenues, net income, and expense ... Read Answer >>
  2. What is the difference between a Golden Cross and a Death Cross Pattern?

    Learn the difference between the golden cross and the death cross, both of which are considered important technical indicators ... Read Answer >>
  3. Why is the Moving Average (MA) important for traders and analysts?

    See why the statistical concept of moving averages plays a central role for traders and chartists who rely on technical analysis ... Read Answer >>
  4. What is the difference between a simple moving average and an exponential moving ...

    The only difference between simple moving average and an exponential moving average is the sensitivity each one shows to ... Read Answer >>
  5. How is the Exponential Moving Average (EMA) formula calculated?

    Learn the formula for calculating both simple moving averages and exponential moving averages, indicators that are frequently ... Read Answer >>
Trading Center