Quote from suriNotes:
Range Bars and Renko Charts
=====================
Renko Charts and Range Bars suppress noise and produce a uniformity
in the underlying trend. Both in Renko/Range bars, the chart dependency on time-axis or
X-axis is completely removed. They also help trader make far lesser decisions
in a trading day than using regular bar-charts or Candlestick charts.
For example, @ES could have 405 One-minute bars in a single day,
but a One-Point @ES may have about 50-100 Renko Boxes which
makes the decision process much easier. The Fewer boxes reduce the
number of variables you need to consider for your trading decisions
during the trading day. Renko charts are symmetric and produce
excellent ways to detect Patterns, Trends, Support/Resistance areas etc.
You can also apply all conventional indicators (MA, BBs, Keltner channels
etc..)
Both Renko/Range Charts have serious caveats traders should be
aware of. Pl. see my articles On "Trading Range Bars" (June 2007) and
"Trading Renko Charts" (Aug. 2007) in Stocks and Commodities
Magazine, where lot more details are provided.
Construction of Renko Boxes
===================
Each Renko box has fixed size (1pt, 2pt, 5pt..) and only the "CLOSE" of the
underlying chart (1m, 5m, 30m, Daily, Weekly ...) matters. Both the High and Low of the
price are ignored. @ES closes at 1380 and if the Box size is 2pts, when
a price closes above or equal on next bar(s) at 1382, the next Up Box (GREEN)
is painted at 45 degrees angle from previous box. In Random noise trends
no Boxes are painted until price closes above 1382. If price closes at 1385
from previous box Close at 1380, there will be TWO Green Boxes are painted.
A Reversal (to the downside) from above criteria occurs if Price closes below
or Equal to 1378 a RED brick is painted etc... Once the boxes are painted,
they are not removed and next box is only drawn when price moves Up/Down
by the box size.
Construction of Range Bars
==================
Range Bars are a unique way of building price-charts with each bar having
the same constant range (High to Low) for the entire chart. These bars
are continuously generated as a new tick is formed outside the minimum
price-range.
** Every bar must have a Constant Range
** A new Range Bar is constructed when a tick closes outside of the Range
** The New Bar's Open Becomes the previous bar's Close (Little different in
Momentum Bars)
** Each bar has its own time-period
I trade Renko/Range Bars in TradeStation with few set of Indicators...
Here is an example of Range and Renko Charts in TradeStation.
Regards,
Suri
<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1808896" >
