Renko day trading strategy

Yes, you can decrease the brick size to have more plots but then you are defeating the biggest pro of Renko and that is cutting down on the noise of the chart. Traders that like to be active in the market such as day traders, may discount the use of Renko in their strategy. There are many ways to trade but I am going to focus on two broad overviews to give you an idea of how simple Renko charts make price action trading:.

I will add that you can use these exact same trading strategy approaches with candlesticks but you will find that Renko charts will allow you to see structures on charts, better. I have synced all the lines to each chart and you can easily see all the choppy action on the candlestick chart is non-existent on the Renko.

The Renko has allowed you to spot the range and the breaks quite easily. As an aside, this snapshot is a live Renko chart and you can see on the right that while the Renko plots at 1. You can see what that is an issue for active traders. What is obvious is that you can not trade candlestick patterns that rely on shadows or inside bars.

You can, as you see on the above Renko , look at various forms of triangles and horizontal chart patterns. This is the daily stock chart of Citigroup. Renko charts can be used for a stock trading strategy, futures, Forex. What I like is that double tops and bottoms, ranges, any consolidations are easy to spot with Renko charts.

This makes being on alert for breakouts much easier. Traders often think that support and resistance are exact price points but they are not. They are zones of price and Renko charts allow you to see those zone quite easily.

In that case, they would make a good addition to a strategy. If I were to use Renko, determining the overall trend direction would be something I would consider. If you were to follow the trend direction shown by the renko chart, you may have not been involved in the price direction on the candlestick chart. This will depend on the setting you choose for the Renko. I prefer sticking to the more conventional charts but Renko does have some pluses such as removing market noise and giving you a clear view of price structure.

Find what works for you and for some, a Renko chart strategy may be where you find trading success. Since we are talking about price action on the charts, take a look at our Candlestick Reversal E-Book you can download for free. Your email address will not be published. Website :. This site uses Akismet to reduce spam. Learn how your comment data is processed. The second part of this series will utilise moving averages to define the direction of the current market trend, combining it with the Renko highs and lows and colour code the chart according to the outcome of our computer analysis.

At the end of this article you will have a chart that turns green when it is time for a long position, and red, if the bears have taken control.

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To define a bullish market we will proceed as recommended by any book on technical analysis: If the short moving average is above the long moving average and the market is trading above the short moving average, this will be our definition of a bullish trend. Just reverse the conditions to get the definition of a bearish market. Apparently, this trend definition is more than primitive. Therefore we just have to add one more condition: If the averages signal a bullish market phase and the price trades above its most recent local high, then — and only then — our trend detection should colour code the chart in green.

So there is no bull market unless the price generates a new high. The input section defines the length of the moving averages. By doing so the periods can be optimized later on to adjust this indicator to any market and time frame. The variables section is needed to define the placeholders for our calculations. Beside the local variables for the moving averages, the colour and the Renko highs and lows, two more global variables were added to pass the outcome of this indicator to the trading strategy. The global colour is needed to define whether the market is in a long or short mode.

The global long average will be used as some kind of trailing stop loss to be described in part 3 of our series. The price chart is being coloured green red when the following conditions are met: Firstly, the moving averages have to signal a bullish bearish market phase. Secondly, the price has to break above below the previous Renko high low. The first half of serves as a good example for the advantage of using the local highs and lows as an additional filter.

As you can see, no bullish trend had been detected, even though the price broke above the moving averages. With the second part of our Renko trading series we fulfilled another important requirement for our trading strategy. In the first step all conditions for a long or short entry were clearly defined by combining the moving averages with the local highs and lows.

Then we programmed a code which colours the price chart subject to the trend condition.

In our third and last part of the Renko series we will show how the trading strategy generates entry orders, how it can be tested and how well even such a simple strategy performs. The first and second parts of this special Renko Trading Tips showed a way to define a trend using the Renko highs and lows with moving averages.

At the end of part two a bar chart was colour coded according to our computer trend analysis, the colour and the long moving average were saved in a global variable. Using this information we will now generate the actual trading signals. When done, we will have a complete automatic trading strategy that can be back tested and optimized. In the previous Trading Tips issue we showed that the colour of the bar chart defines whether the market is in bull or bear mode.

As we have got the colour of the chart in our global variable we can start with two simple orders for the position entry:. Additionally we need some kind of exit. One possibility would be to define a black chart as an order to be flat, since it means that there is no trend. But that would not be the best idea for two reasons. When you have a close look at the colour coded chart you will notice that there are some black days within a fully functional trend. The market might just rest for some days, and it would be useless to close out the position with the first black day.

Usually the market continues its trend very soon, so constantly getting in and out of position just costs a lot of money. On the other side there might be a fast trend change, and our trend detection is just too slow, so we might even want to get out of a long position although the bar chart still is coloured green.

The proper solution is to define a two-step exit. To get out of a long position the long moving average is used as some kind of trailing stop, while the last local Renko low serves as a chart based stop. The system gets us out if the average or the local low is touched whatever comes first. The same logic applies for the short side. The following code represents the trading strategy.

Profitable Renko Strategy – Building your Account, One Brick at a Time

First a variable for the colour of the chart is defined. Then the global colour variable is written into the local one. This seems to be a useless thing, as the global variable will always contain the same value as the local one, but this trick is used to bypass a very specific Tradesignal feature global variables do not have a value for yesterday. But you can do so using the local one! Therefore the global variable was written into the local one. After the colour has been saved the entry command is the next part of the code.

Translated into plain English it goes like this:. If the chart is green and the chart has not been green on the bar before and the chart has not been green 2 bars before then go long at the end of the current bar. It reduces the signal frequency in uncertain times; uncertain times when there is no strong trend and our very basic trend detection is switching between green and black on a daily basis. The entry condition for the short entry is just the same as for the long position, only that the chart has to be red. Next in the code comes the exit.