Motion analysis is of great interest to a variety of applications, such as virtual and augmented reality and medical diagnostics. Hand movement tracking systems, in particular, are used as a human–machine interface. In most cases, these systems are based on optical or acceleration/angular speed sensors. These technologies are already well researched and used in commercial systems. In special applications, it can be advantageous to use magnetic sensors to supplement an existing system or even replace the existing sensors. The core of a motion tracking system is a localization unit. The relatively complex localization algorithms present a problem in magnetic systems, leading to a relatively large computational complexity. In this paper, a new approach for pose estimation of a kinematic chain is presented. The new algorithm is based on spatially rotating magnetic dipole sources. A spatial feature is extracted from the sensor signal, the dipole direction in which the maximum magnitude value is detected at the sensor. This is introduced as the “maximum vector”. A relationship between this feature, the location vector (pointing from the magnetic source to the sensor position) and the sensor orientation is derived and subsequently exploited. By modelling the hand as a kinematic chain, the posture of the chain can be described in two ways: the knowledge about the magnetic correlations and the structure of the kinematic chain. Both are bundled in an iterative algorithm with very low complexity. The algorithm was implemented in a real-time framework and evaluated in a simulation and first laboratory tests. In tests without movement, it could be shown that there was no significant deviation between the simulated and estimated poses. In tests with periodic movements, an error in the range of 1° was found. Of particular interest here is the required computing power. This was evaluated in terms of the required computing operations and the required computing time. Initial analyses have shown that a computing time of 3 μs per joint is required on a personal computer. Lastly, the first laboratory tests basically prove the functionality of the proposed methodology.