Ichimoku Charting and Analysis
time Displacement, Lookback Characteristics, and price
averaging of the Ichimoku Overlay Components
Some unique properties of Ichimoku overlays include:■ (^) Time‐displacement characteristics
■ (^) Lookback characteristics
■ (^) Price‐averaging approach
The Tenkan‐sen is calculated by taking the rolling mid‐range price of the last nine
periods, while the Kijun‐sen is calculated by taking the rolling mid‐range price of the
last 26 periods. Care must be taken here to distinguish between conventional aver-
age mid‐price and mid‐range price. Though both represent a form of average price,
the approach to averaging is markedly different. Mid‐range price is the average price
between the highest peak and the lowest trough of the last N periods, while conven-
tional average mid‐price represents the average of all the mid‐prices of each bar over
the last N periods. In Figure 16.2, H represents the high of each bar, while L represents
the low. Notice the difference between the two average price calculations.
In short, Ichimoku charts use the rolling mid‐range price while conventional
moving averages employ the average mid‐price. Figure 16.3 highlights the visual
contrast between the two types of averaging by comparing the 26‐day simple
moving average to the 26‐day Kijun‐sen. Rolling mid‐range prices do not possess
a smooth appearance, unlike simple moving averages. This is because the rolling
average mid‐range price only changes if there is a higher peak or lower trough
FIgure 16.2 Average Mid‐Price versus Range Mid‐Price.