This is based on my continued study of Renko charts. What follows are thoughts on how I would change my trading behavior and not because I've been successful making $$$ trading this strategy. Also, parts of this is original thoughts but the initial Renko strategy is based on work and ideas shared by @GcNaif.
I currently have a short position in Wheat based on these concepts (an OTM put for May) but any proposed trades I may state here will just be virtual via my optionsxpress account. Option trading seems like it would be difficult to profit from using this strategy unless you deal with options that are ATM.
This strategy is evolving in that I'm trying to change my decision logic from predictive to reactive. The Renko strategy is well suited for this type of trading. Note, to use Renko Intraday charts on TV, you have to pay for a higher Pro subscription.
Charts
My current strategy is to use the 4hr chart with either a 3 or 5 minute Renko. The blksz will vary based on the market. I have some examples below. If your trading strategy is that of a scalper, then maybe a smaller blksz will be more appropriate. For example, a recommended size for crude oil is 10 pips but a scalper may want to use 5 pips. By having the 4hr SxS with the Renko, you can see the actual price behavior for a block which may influence your timing of when/where to take a position.
Moving Averages
On both the 4hr and Renko charts, I use the following:
EMA 50/100/200
MA 20
DEMA 12/20
I use the 50/100/200 EMA to determine overall trend and also to discover points off support and resistance.
Indicators
TSI
4hr 14,4,3 / Renko 10,4,3
TSI (True Strength Index) Used to identify divergence between strength and price in addition to identifying potential buy or sell points at or near the 0 line.
Stochastics
4hr 14,3,3 / Renko 10,3,3
Used to identify transitions between overbought (cross down over 80) and oversold (cross up over 20). Additionally, during a prolonged move, stoch can pull back to the 30-50 area before returning back to the direction of the trend
DMI
4hr 14,14 / Renko 7,10
Used to determine the trend strength and somewhat the direction. When the ADX is at or below 20 and dropping, then there is no trend and price can be consolidating. During this time, identify a trendline, channel, pattern that may contain the price consolidation and wait for a breakout from it. The +/-DI can be used to verify a trade. Basically, when +DI crosses up over -DI, the high price at this cross is the buy trigger and vice versa for a -DI and sell trigger.
RSI
4hr 14 / Renko 10
MA of 9 and WMA of 45
PSAR
Renko .09, .09, and .18 Used to identify potential areas to place stops as market moves
Williams Fractal
Renko (default value) used to Identify when potential change in trend of price is occurring
Initial Strategy
1) Fractal appearance
2) DEMA 12/20 crosses with 2 blocks based on direction of trade
3) Stoch cross confirmation from oversold for buy and overbought for sell
If all three of these appear, then take a position until next fractal
Additional Filters
4) Only take a position with the trend based on the 50/100/200 EMA
5) Take a position on cross of +/-DI using the cross block's high or low as entry point based on buy or sell
6) Don’t take a trade if ADX is dropping through 20 until signs it his beginning to rise with the DI in direction of trend
Note: The ADX should remain at or below 20 for at least 6-10 blocks to make it a valid consolidation. Others, it is possible that it begins to move back up indicating that there is not consolidation but trend is strengthening.
I currently have a short position in Wheat based on these concepts (an OTM put for May) but any proposed trades I may state here will just be virtual via my optionsxpress account. Option trading seems like it would be difficult to profit from using this strategy unless you deal with options that are ATM.
This strategy is evolving in that I'm trying to change my decision logic from predictive to reactive. The Renko strategy is well suited for this type of trading. Note, to use Renko Intraday charts on TV, you have to pay for a higher Pro subscription.
Charts
My current strategy is to use the 4hr chart with either a 3 or 5 minute Renko. The blksz will vary based on the market. I have some examples below. If your trading strategy is that of a scalper, then maybe a smaller blksz will be more appropriate. For example, a recommended size for crude oil is 10 pips but a scalper may want to use 5 pips. By having the 4hr SxS with the Renko, you can see the actual price behavior for a block which may influence your timing of when/where to take a position.
Moving Averages
On both the 4hr and Renko charts, I use the following:
EMA 50/100/200
MA 20
DEMA 12/20
I use the 50/100/200 EMA to determine overall trend and also to discover points off support and resistance.
Indicators
TSI
4hr 14,4,3 / Renko 10,4,3
TSI (True Strength Index) Used to identify divergence between strength and price in addition to identifying potential buy or sell points at or near the 0 line.
Stochastics
4hr 14,3,3 / Renko 10,3,3
Used to identify transitions between overbought (cross down over 80) and oversold (cross up over 20). Additionally, during a prolonged move, stoch can pull back to the 30-50 area before returning back to the direction of the trend
DMI
4hr 14,14 / Renko 7,10
Used to determine the trend strength and somewhat the direction. When the ADX is at or below 20 and dropping, then there is no trend and price can be consolidating. During this time, identify a trendline, channel, pattern that may contain the price consolidation and wait for a breakout from it. The +/-DI can be used to verify a trade. Basically, when +DI crosses up over -DI, the high price at this cross is the buy trigger and vice versa for a -DI and sell trigger.
RSI
4hr 14 / Renko 10
MA of 9 and WMA of 45
PSAR
Renko .09, .09, and .18 Used to identify potential areas to place stops as market moves
Williams Fractal
Renko (default value) used to Identify when potential change in trend of price is occurring
Initial Strategy
1) Fractal appearance
2) DEMA 12/20 crosses with 2 blocks based on direction of trade
3) Stoch cross confirmation from oversold for buy and overbought for sell
If all three of these appear, then take a position until next fractal
Additional Filters
4) Only take a position with the trend based on the 50/100/200 EMA
5) Take a position on cross of +/-DI using the cross block's high or low as entry point based on buy or sell
6) Don’t take a trade if ADX is dropping through 20 until signs it his beginning to rise with the DI in direction of trend
Note: The ADX should remain at or below 20 for at least 6-10 blocks to make it a valid consolidation. Others, it is possible that it begins to move back up indicating that there is not consolidation but trend is strengthening.
