Thursday, 2 June 2011

Renko or Range Bars

I've been playing around with Renko charts as an alternative to Range bars. They are very similar. Renko has an advantage of less overlap and takes away even more noise than the range bars.

My MarketDelta platform has Renko charts with wicks, like candlesticks. Why are wicks important? Because Renko's are normally drawn without wicks, which means that you cannot see the real range of the bar as they are constructed using the Open and the Close, High and Low being ignored. This makes it difficult to back test as you cannot see when and if you would have been stopped out or whether your target has been hit - a major problem for Renkos.
By enabling the "wick" option in MarketDelta this drawback is eliminated.

I'm not necessarily recommending a change from range to Renko yet but suggest looking at it - with or without a wick - if you are finding that the range bar periodicity you are using is not doing the job.

Additionally, I play around with the brick size of my Renkos. I can drop it down to as small as 0.75 points on, say, the ES or 2 points on the DAX and get real visibility of the order flow when using the other tools.

Here's this morning's (London) DAX.

1 comment:

  1. Thanks. I will definitely take a look at Renko Bars