Renko + Logic = £££££

*****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.

Here's an example of type 1. A break of resistance in the direction of a trend. The set up is fairly obvious to spot. The price banged it's head multiple times against the 0.9280 level. The entry is when the first bar formed above the resistance level. The exit is when the price pulled back by 2 full bars. This is a 200 pip trade.

Here's an example of a type 2 trade. The price broke a resistance level then came back and retested it. The entry is the when the first green candle opens back in the direction of the trend. You can see in this example that the trade worked out and then pulled back. This may or may not have triggered the 80 pip stop but if it didn't it went on to be a good trade. These are just examples of entries, not all perfect trades.

My buddy and I played around for a while with them before we both got sick. He actually met a professional trader while in the hospital who retired trading Forex. This guy told him that it wasn't until Renko bars that he became successful. That is what got us into it. I look forward to following along.

Dust

This is type 3. Usdjpy. No trades marked here, take your pick. The entry signal is the formation of the first red brick away from a strong resistance level and the first green away from support. A few examples here.

Thanks for the info, glad to have you along.

Here's type 4. I'm still evaluating the usefulness of trendlines on renko charts but this trade is 62 pips up at the moment so not knocking it! I took the trade this morning when xxxusd were looking bullish and usdxxx were looking bearish. It took a while to work out but doing ok now. My target for this trade is 0.9080 where there is some quite strong support. That will be +100 pips.

At the moment I'm struggling to find an example for type 5 but I'll post one as soon as one arrives.

Here are the current charts with s/r drawn. You can clearly see in advance the areas you are watching for breaks/holds.

Hi there i was wondering if you could post the indicator for the Renko charts?

One important rule for me is to only have one trade at risk at any one time. That means only one stop loss risked. If I have a trade at break even or better then I can open another trade. All the time I have money risked then it's no trade until that trade either fails or breaks even. This helps to eliminate overtrading which used to be one of my main downfalls.

I should mention that trading using these bars takes lots of patience. There are periods when not much seems to happen. It can take 6 or more hours for one of these bars to form, if the market isn't moving then neither is the chart. I see this as a positive thing, when everything is moving at 100 miles per hour you can feel as though you are missing out on something. When everything is calm and sedate that's the way you feel and you can make better decisions.

I also should mention that the "new candle alarm" for mt4 that you can find on the forum (and elsewhere) is awesome for renko traders. No need to watch the screen, just put the new candle alarm on and wait for the alert. You only need to check your charts when you get an alert.

If you check the link in post 1 you have 3 options for mt4 renko charts... Indie, ea and script.

Ok, here's an example of trade type 5. A trendline break.

Not very good support for a thread that YOU have started, at the very least you could mention WHICH you are using to generate the Renko bars - a Script, an Indicator, or an EA, so followers have at least some chance of using charts similar to yours.

Unless somehow I'm missing the intent of this thread perhaps? If you are to help fellow traders and educate them on a "new" method, shouldn't we be privy to the same tools as you are using? I mean, you have read all the other thread and found out which is the best? From my quick read over there, seems the EA is better option?

Then again, this is in the Journal section, so perhaps it is only to record your trading and not help anyone.

Apology in advance if that seems blunt & in your face, but that's how I see the situation.

I think the other thread has enough information on how to set up renko charts on metatrader that I don't need to spoon feed it to people here. I'm sure by no means what I am doing is new in any way but I am posting what I have had success with and what I think will continue to be successful in order to help people that way. A little bit of work on their part is not surely too much to ask?

Lou G

I've said this dozens of times but no one seems to listen:

NONE of the script-based versions of RenkoLiveChart are accurate or dependable.

NONE of the indicator-based ones are accurate or dependable.

RenkoLiveChart_v3.2 (or RenkoLiveChart_v3.3 if you prefer to see the current bar displayed in a different way) are the only completely correct open source EA's. Search within this thread (or use the paper clip icon) to locate the source code.

If you don't want to use the open source version, buy the commercial version.

Renko Block Charts

Quoting Hugh Briss

Disliked

If you have any questions feel free to ask.

Ignored

So, again, are you using -

1. Script

2. Indicator

3. EA

to generate the Renko bars?

Which one and why do you find it the best?

Thanks, and kind regards.

The indicator version works fine for me. From what the guy says the EA is best to use. Go with what he says but you know this already because you posted on that thread so instead of asking questions here why don't you provide the answers?

So even to mention which tools you are using, or attach them in Post #1 (like hundreds of other threads here in FF) is spoon feeding us?

What, a link to the thread with the indies on isn't enough for you?