Tenkan-Sen
Tenkan-sen is the midpoint between the highest and lowest prices of an asset in the past nine cycles. It is calculated by the average of the highest and lowest prices over the past nine trading days, and is mainly used to identify short-term trend changes in the market and possible reversal points.
In technical analysis, Tenkan-sen line is regarded as an important reference index to predict the future trend of prices, especially in determining the timing of buying or selling.
Tenkan-sen (Conversion Line)
Definition
The Tenkan-sen, or Conversion Line, is the midpoint of the highest and lowest prices of an asset over the past nine periods. It is calculated by averaging the highest high and the lowest low over the past 9 trading days. This line is primarily used to identify short-term trend changes and potential reversal points in the market. In technical analysis, the Tenkan-sen is considered an important reference indicator for predicting future price movements, especially in determining buy or sell timing.
Origin
The Tenkan-sen was invented by Japanese technical analyst Goichi Hosoda in the 1930s. He developed a technical analysis tool called the Ichimoku Kinko Hyo, of which the Tenkan-sen is a crucial component. This tool was first published in 1969 and quickly gained widespread use in Japan and globally.
Categories and Characteristics
The Tenkan-sen has the following key characteristics:
- Short-term Trend Identification: By calculating the average of the highest and lowest prices over the past 9 trading days, the Tenkan-sen helps investors identify short-term trends.
- Reversal Point Prediction: When the price crosses the Tenkan-sen, it may indicate a potential market trend reversal.
- Buy/Sell Signals: The crossing of the Tenkan-sen and the Kijun-sen (Base Line) can serve as buy or sell signals.
Specific Cases
Case 1: Suppose a stock has a highest price of 100 units and a lowest price of 80 units over the past 9 trading days. The Tenkan-sen value would be (100+80)/2 = 90 units. If the current price rises from 85 units and breaks through the 90-unit Tenkan-sen, this could be a buy signal.
Case 2: In the forex market, suppose the EUR/USD pair has a highest price of 1.2000 and a lowest price of 1.1800 over the past 9 trading days. The Tenkan-sen value would be (1.2000+1.1800)/2 = 1.1900. If the current price rises from 1.1850 and breaks through the 1.1900 Tenkan-sen, it may indicate that the euro will continue to strengthen in the short term.
Common Questions
Q1: What is the difference between the Tenkan-sen and the Kijun-sen?
A1: The Tenkan-sen is the average of the highest and lowest prices over the past 9 trading days, while the Kijun-sen is the average of the highest and lowest prices over the past 26 trading days. The Tenkan-sen is more suitable for short-term trend analysis, while the Kijun-sen is better for medium-term trend analysis.
Q2: Can the calculation period for the Tenkan-sen be adjusted?
A2: Although traditionally 9 trading days are used, investors can adjust the calculation period according to their needs to suit different market conditions and trading strategies.
