Thoughts on using Renko Charts (cont.)
Some of the following ideas are based on concepts outlined in this link: forexformation.com/mechanical-trading-system-based-on-renko-charts/
And, from the book "New Concepts in Technical Trading Systems" by J. Welles Wilder, Jr.
In my previous ideas on renko charts, my main goal was to identify price consolidation based on ADX and then trade the breakout. In this idea, I'm going to add another concept which is using the Parabolic SAR that was originally described in J. Welles Wilder's book and also included in the link above. In addition to the PSAR, Wilder created the Directional Movement Indicator (DMI) which includes the ADX that I've leveraged too.
In his book, while describing the PSAR system, he added an alternate way to trade the system which is to use the DMI to determine when to trade. For example, if the +DI is dominate, then only trade to the up side based on PSAR signals and likewise, if the -DI is dominate, only trade when -PSAR signals are to the down side. If the market is not trending (the ADX is dropping to 20 or below), don't use this or stay out of market.
In Wilder's book, he suggested the parameter defaults that are used by TV but the above link uses an AF of .09 and increment of .09. I'm not sure why but it looks like this might work better with Renko Charts.
For Renko Charts, I'm using 3 views of a market (using crude oil as an example):
Daily TF: source/close | style/traditional | blksz/.50
2Hr TF: source/close | style/traditional | blksz/.25
5Min TF: source/close | style/traditional | blksz/.10
I use the daily TF to get a sense of what the market direction or bias, the 2Hr to look for patterns to trade and the 5Min to time or trigger a trade.
Using Wilder's suggestion to use the DMI to determine the trades to make, I'm going to start by using the daily TF DMI to drive which direction to make trade but use the 2Hr to identify the block/PSAR to make a trade and the 5Min to finalize the trade.
With this being said:
Daily TF: +DI is dominate to only take trades to upside
2Hr TF: PSAR signaled a buy several blocks back
5Min TF: Currently in a price consolidation and waiting for a breakout above 54 to potentially go long
And, from the book "New Concepts in Technical Trading Systems" by J. Welles Wilder, Jr.
In my previous ideas on renko charts, my main goal was to identify price consolidation based on ADX and then trade the breakout. In this idea, I'm going to add another concept which is using the Parabolic SAR that was originally described in J. Welles Wilder's book and also included in the link above. In addition to the PSAR, Wilder created the Directional Movement Indicator (DMI) which includes the ADX that I've leveraged too.
In his book, while describing the PSAR system, he added an alternate way to trade the system which is to use the DMI to determine when to trade. For example, if the +DI is dominate, then only trade to the up side based on PSAR signals and likewise, if the -DI is dominate, only trade when -PSAR signals are to the down side. If the market is not trending (the ADX is dropping to 20 or below), don't use this or stay out of market.
In Wilder's book, he suggested the parameter defaults that are used by TV but the above link uses an AF of .09 and increment of .09. I'm not sure why but it looks like this might work better with Renko Charts.
For Renko Charts, I'm using 3 views of a market (using crude oil as an example):
Daily TF: source/close | style/traditional | blksz/.50
2Hr TF: source/close | style/traditional | blksz/.25
5Min TF: source/close | style/traditional | blksz/.10
I use the daily TF to get a sense of what the market direction or bias, the 2Hr to look for patterns to trade and the 5Min to time or trigger a trade.
Using Wilder's suggestion to use the DMI to determine the trades to make, I'm going to start by using the daily TF DMI to drive which direction to make trade but use the 2Hr to identify the block/PSAR to make a trade and the 5Min to finalize the trade.
With this being said:
Daily TF: +DI is dominate to only take trades to upside
2Hr TF: PSAR signaled a buy several blocks back
5Min TF: Currently in a price consolidation and waiting for a breakout above 54 to potentially go long
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