Should You Trade Candlesticks, Heiken-Ashi, or Better Renko Bars for Intraday Stock and Commodities Market Trading ?
I get all of my intraday trading concepts from price motion; then use indicators to enter or exit a trade. There are traders who trade purely on price motion and avoid any confirmation and I’ve determined that they are most probably wiser than me or expert about their intraday trading skills. Both approach, it is really does not matter to me. That’s said, you’ll have to resolve the way you wish to show your price and we are taking a look at three methodologies and will crack them down a little bit. Let’s begin with candlesticks.
Candlesticks: These bars have change into, lately, the usual in trading mcx commodities and stock market; they present the open, close, and range of any given bar. In reality, they’re a more colourful model of the usual line bar. Generally, I do not look after candlesticks because they are a bit noisy to trade. That is a personal desire of mine, not some scientific conclusion. I am inclined to use bars that take the noise out of the candlestick patterns and have traded that manner for many years of my career.
On that note, there are bound to be some intraday traders who trade Japanese candlestick patterns who will disagree with me on this count. I have read Nison’s Japanese candlestick pattern books with all of the humorous names like: hanging man, doji, spinning top… etc. To these traders I might recommend a good read of David Aronson’s e-book, “Evidence Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals.” Actually, I extremely suggest all traders learn this book, because it provides insights into technical analysis that provides you with pause for repose. With out getting right into a prolonged discussion on Aronson’s analysis, his findings refute any statistical relationship between Japanese candlestick formations and their predictive outcome. The precise wording is they’re “statistically insignificant.” Ouch, I can hear refrain of naysayers shouting at me. I have tried buying and selling Japanese candlestick patterns and have a tendency to agree with Aronson, they might have worked centuries ago in Japan but they are of little use in at this time’s information-wealthy market.
Heiken-Ashi Bars: I am a bit extra upbeat on Heiken-Ashi bars as they’re excellent in trading a trending market. Unfortunately, they will obliterate your trading account in a choppy or bracketed market. Here is why:
· Close = (open + high + low + close) / 4
· High = maximum of high, open, or close (whichever is highest)
· Low = minimum of low, open, or close (whichever is lowest)
· Open = (open of previous bar + close of previous bar) / 2
It must be readily apparent that Heiken-Ashi bars use an averaging methodology and the price they show could not necessarily be the precise market price. That is a real problem for me because I am not in a position to see the actual price motion, which is what I am in search of to search out trade set-ups. However, these bars are great in a trending market and will maintain you to trade longer than you might normally stay thus extending your profits. Nonetheless, no price action right here and that is a deal breaker.
Better Renko Bars: Like all renko bars, they show price motion in a single direction. I usually set them to four ticks, as that has given me one of the best results. The primary difference between Better Renko Bars and Renko bars is the Better Renko Bars have complete shadows (or wicks, for some folks) so I can see the price motion very precisely and make sound decisions. There isn’t a averaging method used to calculate these bars and since they move in a single direction till a reversal happens, I can get a superb learn on what is going on with price. Add a divergence enter collection indicator and hyperlink it with the Commodity Channel Index and you have a robust trading system in itself. Either means, I get the most effective read on price by eradicating the noise and making the most of the benefits of Better Renko Bars.
It is robust to cram all the information that I would like to embrace into a brief article. It is my hope that this short discussion will make you curious sufficient to analyze completely different price display methodologies in your MCX Commodities and NSE Future Options trading.
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