*****Updated 29th Jan 2012: New trade type added *****
I've been looking into trading using renko charts for a while now and I think I have the ground rules in place to start making some healthy profits. If you don't know what renko charts are or how to use them then start with the thread below.
http://www.forexfactory.com/showthread.php?t=189584
That will get you started with renko for metatrader and give you some idea how they work. Basically renko charts are price based and not time based so it doesn't matter how long a bar takes to form it will only form when the price has moved by the amount you set your brick size to.
I've been using 20 pip bricks for major pairs except for usdjpy which is 10 pips. I find this the best size for me.
The advantage to using renko charts is that support and resistance levels are much more clear and it also filters out a lot of the noise that is created by traditional bars or candles. A bar or candle chart has to do something whether the price is moving or not, even if the price just goes sideways the bars have to print. With renko you are only given the information that matters the most, where the price has actually been and is possibly going.
I have taken lots of trades using renko charts and with a bit of trial and error I have isolated what I believe to be the best signals. In the past I have not been recording these trades and that is the purpose of this thread (as well as to try and help some people make some money!).
There are a few different types of trades that I will be taking.
1) Support/resistance break with the trend. As you would expect this is the break of a s/r level in the direction of a trend.
2) Support/resistance hold with the trend. After the breakout if price retests a strong s/r level.
3) Support/resistance break out of a range. Validated by at least 2 touches top and bottom.
4) Support/resistance hold into a range. If price seems to be caught in a range.
5) Trendline holds. In the direction of a trend.
6) Trendline breaks. Against the previous trend and if no strong s/r levels are too close.
I will document and gather stats for each type of trade seperately over a period of time and if one particular type of trade outperforms the other then I will continue to use just that and if one type of trade underperforms strongly then I will stop using it.
Over the next few posts I will try and post an example of each type of trade.
I am using a small test account to start with, in the tens of pounds, not even hundreds, but as time goes on I will increase it. Also I am only using the 6 majors to start with, I may spread out into usd pairs, eur pairs, gbp pairs etc and monitor the groups seperately. I am using visual relative strength analysis to inform my trades. What I mean by that is looking through related pairs and only taking valid trades if the related pairs are moving in the same general direction. ie all xxxusd pairs rising, a buy on audusd is valid.
I am using a 50 pip initial stop with an 80 pip trailing stop. 50 pips is 2.5 bricks away from entry which means that the price can go against me by one brick initially before being stopped out. 80 pips is 4 bricks which means the price can go back by 2 full bricks against me before I will be stopped out. I have found that this will keep you in for some good moves and allow the odd small pullback without giving too much away if the trend does reverse. I will take profits at logical levels such as a strong s/r level if I have 100 or more pips in the trade as this represents at least a 2:1 r/r.
As you can see on the charts I am drawing s/r at logical levels and I also have a 20 ema and a 100 sma on the chart. These ma's are just to provide a visual aid to determine the trend. Strictly speaking they are not necessary but they do no harm.
If you have any questions feel free to ask.
I've been looking into trading using renko charts for a while now and I think I have the ground rules in place to start making some healthy profits. If you don't know what renko charts are or how to use them then start with the thread below.
http://www.forexfactory.com/showthread.php?t=189584
That will get you started with renko for metatrader and give you some idea how they work. Basically renko charts are price based and not time based so it doesn't matter how long a bar takes to form it will only form when the price has moved by the amount you set your brick size to.
I've been using 20 pip bricks for major pairs except for usdjpy which is 10 pips. I find this the best size for me.
The advantage to using renko charts is that support and resistance levels are much more clear and it also filters out a lot of the noise that is created by traditional bars or candles. A bar or candle chart has to do something whether the price is moving or not, even if the price just goes sideways the bars have to print. With renko you are only given the information that matters the most, where the price has actually been and is possibly going.
I have taken lots of trades using renko charts and with a bit of trial and error I have isolated what I believe to be the best signals. In the past I have not been recording these trades and that is the purpose of this thread (as well as to try and help some people make some money!).
There are a few different types of trades that I will be taking.
1) Support/resistance break with the trend. As you would expect this is the break of a s/r level in the direction of a trend.
2) Support/resistance hold with the trend. After the breakout if price retests a strong s/r level.
3) Support/resistance break out of a range. Validated by at least 2 touches top and bottom.
4) Support/resistance hold into a range. If price seems to be caught in a range.
5) Trendline holds. In the direction of a trend.
6) Trendline breaks. Against the previous trend and if no strong s/r levels are too close.
I will document and gather stats for each type of trade seperately over a period of time and if one particular type of trade outperforms the other then I will continue to use just that and if one type of trade underperforms strongly then I will stop using it.
Over the next few posts I will try and post an example of each type of trade.
I am using a small test account to start with, in the tens of pounds, not even hundreds, but as time goes on I will increase it. Also I am only using the 6 majors to start with, I may spread out into usd pairs, eur pairs, gbp pairs etc and monitor the groups seperately. I am using visual relative strength analysis to inform my trades. What I mean by that is looking through related pairs and only taking valid trades if the related pairs are moving in the same general direction. ie all xxxusd pairs rising, a buy on audusd is valid.
I am using a 50 pip initial stop with an 80 pip trailing stop. 50 pips is 2.5 bricks away from entry which means that the price can go against me by one brick initially before being stopped out. 80 pips is 4 bricks which means the price can go back by 2 full bricks against me before I will be stopped out. I have found that this will keep you in for some good moves and allow the odd small pullback without giving too much away if the trend does reverse. I will take profits at logical levels such as a strong s/r level if I have 100 or more pips in the trade as this represents at least a 2:1 r/r.
As you can see on the charts I am drawing s/r at logical levels and I also have a 20 ema and a 100 sma on the chart. These ma's are just to provide a visual aid to determine the trend. Strictly speaking they are not necessary but they do no harm.
If you have any questions feel free to ask.