Real and fake TK crosses

Thread by Dr Cat@DoctorCatX · Jul 22, 2024 · 13 posts · 1,232 words · 8 min read

Real and fake TK crosses This is the 4th Ichimoku thread and here I will cover how to distinguish fake from real Kijun Sen/Tenkan Sen (TK) crosses. This is the first thread with advanced knowledge and it contains information which I don't think is widely available. 🧵👇
1/13View on X
1/11 In its first version, Ichimoku consisted only of Kijun Sen and Tenkan Sen - no cloud and no Chiko Span. These two lines (the mid S/R and the short S/R) provide a signal when they cross. Many people assume that the mere fact that Tenkan has gone over Kijun is strictly bullish and vice versa. But this can't be further from the truth. Even if we leave aside other context as whether this signal flashes below, above or inside the cloud, where is CS, what is the situation on other timeframes, etc... there are certain guidelines to follow to filter out the real crosses and prevent fakeouts.
2/13View on X
2/11 ❓First, let's try to understand the logic of why Tenkan Sen crossing above Kijun Sen is supposed to be bullish (or vice versa). Tenkan Sen is the middle value of the highest high and the lowest low in the past 9 candles. We can think of it as a middle of the short term range. Kijun Sen is the same but for the past 26 candles (the mid term range). ❓So, what would make Tenkan Sen cross above Kijun Sen? The fact that the most recent short-term range is already higher than the mid-range, i.e., there is a higher high or a lower low within 9 candles, which is higher or lower than the common extremes from 26 candles.
3/13View on X
3/11 ❓On the other side, what would make a Tenkan Sen or Kijun Sen stay flat? They would stay flat if for 9 or 26 candles respectively there is no higher high or lower low and the range stays the same.
4/13View on X
4/11 What would make any of these lines to slope in the opposite direction of the trend? If we get a lower low or a lower high within the 26 candles extremes, Kijun Sen would turn down. Same for Tenkan Sen, with 9 candles. And vice versa: if we renew the range high or set a higher range low, these lines would turn up.
5/13View on X
5/11 ❓Now, if we expect the TK cross to be a bullish signal, why do we expect that? Because we expect that the price is entering a new, fresher range with higher highs / higher lows and thus is decoupling from the old range.
6/13View on X
6/11 ❓With that being said, if you see Tenkan Sen crossing above Kijun Sen, but Kijun Sen turning down, should this be a valid cross/buy signal? Of course not. Because the shorter term/fresher range is indeed higher. But the price is still in a bigger, 26-candles long range, which is getting a bearish bias. Because for Kijun Sen to turn down, it means we have gotten a LL or LH within the 26 candles range extremes.
7/13View on X
7/11 ❓If Tenkan Sen crosses above Kijun Sen, but Kijun Sen stays flat, is this a valid cross? No. Because the shorter term range is indeed higher, but the mid term range with 26 candles stays the same. This means that the HL or HH causing the short term range to be higher is not higher enough to get it out of the scope of the mid range.
8/13View on X
8/11 ❓So what do we want for a real cross? The price to get out of the mid term range and to start making new HL/HH. This can be achieved with the following rules, which should be covered for a TK cross to be real: 1⃣ Tenkan Sen must start going away from Kijun Sen. Because for this to happen, it means that we haven't got just one random HH/HL, but the recent session of 9 candles is rather establishing a new uptrend which is deviating nicely from the bigger, mid session with 26 candles. 2⃣ Kijun Sen must start moving in the direction of the price at or shortly after the cross. Kijun Sen must not be flat or descending. Because we want also the bigger range to start making HH or HL - and if this happens, Kijun Sen will turn up. As opposed, if Kijun Sen is turning down but Tenkan Sen is turning up, it means that the bigger period is trending down, while the shorter one is trending up - and obviously the bigger period is more important. If Kijun Sen stays flat, but Tenkan Sen is pointing up and crosses above it, this is also still not a valid cross. because it means that some minor low or high has been renewed in the recent 9 candles session, but the overall picture of the bigger session with 26 candles stays in a range. If at the time of the cross Kijun Sen is not turning up, there is still a chance for this to happen briefly after that but we need to wait a few candles and see. 3⃣ The price must start moving in the direction of the breakout, or, if it retraces to Kijun Sen it must bounce immediately and strongly from it. Because we want the ultimate confirmation of the cross - that the current price itself tells us the same story: bullish trend, i.e. above Tenkan Sen and Kijun Sen, and moving upwards to see a continuation of the breakout. The above examples are for bullish crossovers but obviously the same applies in the opposite way for death crosses.
9/13View on X
9/11 ❓A logical question is: if we need so many confirmations and may need a few candles for them, isn't it too late until we understand if the cross is fake or not? And yes, it may be a bit late, sometimes more late. But in TA, where everything is probabilities, we pay the price for being late to get more certainty. Most of the time if not all of the time this is worth it. It often takes a few candles max to confirm a TK cross as a valid one.
10/13View on X
10/11 One more thing. If we see a death cross in an uptrend, which doesn't cover the conditions for a real one - or a golden cross in a downtrend. We can assume that this is not a reversal signal as it may be a fake cross. But the fact that we are seeing a death cross on an uptrend, even if a fake one, should always be taken seriously as a big warning sign of a potentially ending trend. Because often times when the trend ends, it first enters a range, and then potentially reverses (or keeps going). Within a range, there could be many fake crosses - and only the last one, which breaks out successfully out of the range is the real one - and to find out which one we need to use the above rules.
11/13View on X
11/11 If you found this thread useful it could be great to like and share the original tweet. I don't sell anything, I just share my knowledge for free. I don't have a lot of followers so if you think this knowledge is worth it to reach more people you can help the Twitter algo spread it.
12/13View on X
Previous lessons: 1. The Ichimoku TA system https://x.com/drpastet/status/1810173302792471028… 2. Tenkan Sen https://x.com/drpastet/status/1810173264020328553 3. Kijun Sen https://x.com/drpastet/status/1813659904688685089
13/13View on X

Dr Cat answered 1 question

under this thread · top answer 1 likes

@kapitelgossn asked

Love the advanced insights👍, many thanks for these lessons & your efforts!

My pleasure, thanks for your support!

Dr Cat@DoctorCatX1 likesView on X

Real and fake TK crosses

Thread by Dr Cat@DoctorCatX · Jul 22, 2024 · 13 posts · 1,232 words · 8 min read

Real and fake TK crosses This is the 4th Ichimoku thread and here I will cover how to distinguish fake from real Kijun Sen/Tenkan Sen (TK) crosses. This is the first thread with advanced knowledge and it contains information which I don't think is widely available. 🧵👇
1/13View on X
1/11 In its first version, Ichimoku consisted only of Kijun Sen and Tenkan Sen - no cloud and no Chiko Span. These two lines (the mid S/R and the short S/R) provide a signal when they cross. Many people assume that the mere fact that Tenkan has gone over Kijun is strictly bullish and vice versa. But this can't be further from the truth. Even if we leave aside other context as whether this signal flashes below, above or inside the cloud, where is CS, what is the situation on other timeframes, etc... there are certain guidelines to follow to filter out the real crosses and prevent fakeouts.
2/13View on X
2/11 ❓First, let's try to understand the logic of why Tenkan Sen crossing above Kijun Sen is supposed to be bullish (or vice versa). Tenkan Sen is the middle value of the highest high and the lowest low in the past 9 candles. We can think of it as a middle of the short term range. Kijun Sen is the same but for the past 26 candles (the mid term range). ❓So, what would make Tenkan Sen cross above Kijun Sen? The fact that the most recent short-term range is already higher than the mid-range, i.e., there is a higher high or a lower low within 9 candles, which is higher or lower than the common extremes from 26 candles.
3/13View on X
3/11 ❓On the other side, what would make a Tenkan Sen or Kijun Sen stay flat? They would stay flat if for 9 or 26 candles respectively there is no higher high or lower low and the range stays the same.
4/13View on X
4/11 What would make any of these lines to slope in the opposite direction of the trend? If we get a lower low or a lower high within the 26 candles extremes, Kijun Sen would turn down. Same for Tenkan Sen, with 9 candles. And vice versa: if we renew the range high or set a higher range low, these lines would turn up.
5/13View on X
5/11 ❓Now, if we expect the TK cross to be a bullish signal, why do we expect that? Because we expect that the price is entering a new, fresher range with higher highs / higher lows and thus is decoupling from the old range.
6/13View on X
6/11 ❓With that being said, if you see Tenkan Sen crossing above Kijun Sen, but Kijun Sen turning down, should this be a valid cross/buy signal? Of course not. Because the shorter term/fresher range is indeed higher. But the price is still in a bigger, 26-candles long range, which is getting a bearish bias. Because for Kijun Sen to turn down, it means we have gotten a LL or LH within the 26 candles range extremes.
7/13View on X
7/11 ❓If Tenkan Sen crosses above Kijun Sen, but Kijun Sen stays flat, is this a valid cross? No. Because the shorter term range is indeed higher, but the mid term range with 26 candles stays the same. This means that the HL or HH causing the short term range to be higher is not higher enough to get it out of the scope of the mid range.
8/13View on X
8/11 ❓So what do we want for a real cross? The price to get out of the mid term range and to start making new HL/HH. This can be achieved with the following rules, which should be covered for a TK cross to be real: 1⃣ Tenkan Sen must start going away from Kijun Sen. Because for this to happen, it means that we haven't got just one random HH/HL, but the recent session of 9 candles is rather establishing a new uptrend which is deviating nicely from the bigger, mid session with 26 candles. 2⃣ Kijun Sen must start moving in the direction of the price at or shortly after the cross. Kijun Sen must not be flat or descending. Because we want also the bigger range to start making HH or HL - and if this happens, Kijun Sen will turn up. As opposed, if Kijun Sen is turning down but Tenkan Sen is turning up, it means that the bigger period is trending down, while the shorter one is trending up - and obviously the bigger period is more important. If Kijun Sen stays flat, but Tenkan Sen is pointing up and crosses above it, this is also still not a valid cross. because it means that some minor low or high has been renewed in the recent 9 candles session, but the overall picture of the bigger session with 26 candles stays in a range. If at the time of the cross Kijun Sen is not turning up, there is still a chance for this to happen briefly after that but we need to wait a few candles and see. 3⃣ The price must start moving in the direction of the breakout, or, if it retraces to Kijun Sen it must bounce immediately and strongly from it. Because we want the ultimate confirmation of the cross - that the current price itself tells us the same story: bullish trend, i.e. above Tenkan Sen and Kijun Sen, and moving upwards to see a continuation of the breakout. The above examples are for bullish crossovers but obviously the same applies in the opposite way for death crosses.
9/13View on X
9/11 ❓A logical question is: if we need so many confirmations and may need a few candles for them, isn't it too late until we understand if the cross is fake or not? And yes, it may be a bit late, sometimes more late. But in TA, where everything is probabilities, we pay the price for being late to get more certainty. Most of the time if not all of the time this is worth it. It often takes a few candles max to confirm a TK cross as a valid one.
10/13View on X
10/11 One more thing. If we see a death cross in an uptrend, which doesn't cover the conditions for a real one - or a golden cross in a downtrend. We can assume that this is not a reversal signal as it may be a fake cross. But the fact that we are seeing a death cross on an uptrend, even if a fake one, should always be taken seriously as a big warning sign of a potentially ending trend. Because often times when the trend ends, it first enters a range, and then potentially reverses (or keeps going). Within a range, there could be many fake crosses - and only the last one, which breaks out successfully out of the range is the real one - and to find out which one we need to use the above rules.
11/13View on X
11/11 If you found this thread useful it could be great to like and share the original tweet. I don't sell anything, I just share my knowledge for free. I don't have a lot of followers so if you think this knowledge is worth it to reach more people you can help the Twitter algo spread it.
12/13View on X
Previous lessons: 1. The Ichimoku TA system https://x.com/drpastet/status/1810173302792471028… 2. Tenkan Sen https://x.com/drpastet/status/1810173264020328553 3. Kijun Sen https://x.com/drpastet/status/1813659904688685089
13/13View on X

Dr Cat answered 1 question

under this thread · top answer 1 likes

@kapitelgossn asked

Love the advanced insights👍, many thanks for these lessons & your efforts!

My pleasure, thanks for your support!

Dr Cat@DoctorCatX1 likesView on X