I have never completely understood the link between the stock market trading and time periods. After all, time is an arbitrary dimension established by human kind and does not tell me much about potential price movement and price action. I judge that I am in minority in this view, which is nothing latest for me; on the other hand, if you truly want to focus on price action why not use bars that are designed to perform just that?
Candlesticks are hard and noisy to interpret and I have seen many traders stressed trading the darn things. We tend to set unique time periods to calculate price action and make unique plans based upon the price action that happens during the time period. This looks counterintuitive to me, as the market does not trade with three minutes, five minutes, or twenty minutes increments. Price action is an evolving and ongoing variable that charge throughout the course of the day. I am attracted in actual price action; I am not attracted in all the loud set-ups that are trading “background noise.” When dealing with candlesticks you get the full plan; price movement and all the associated background noise.
Renko and range bars from without advantage of any time constraints, they easily express actually what the price is doing at a given point of time during the day of trading. Renko bars have their origin in Japan trading and are solely linked with price action; there is no time restriction on how long it takes a four Renko bar to form. It only forms when the market moves four ticks in the same way. Four range bars from within price action moves 4 ticks in any way. That being said, non-time related bars are especially helpful for resistance and support traders as these levels are simply seen because of the nature of the Renko bar movement.
There are lots of differences of Renko bars besides of the usual “bricks” used in the bar trading. I individually favor the “Perfect Renko” bars because they obviously point out the range of a given bar during its making. More recently “UniRenko bars” have made their attendance; these bars are similar to perfect Renko bars but they use an averaging system that is similar to Heiken-Ashi bars. I have had amazing victory with Heiken-Ashi trading using markets of trading but they can be a little tricky in a sideways market. For that factor alone, I stick with the perfect Renko bar.
Candlesticks one other hand have their big uses, but you have to linked with an amazing deal of market noise interpretation and I have found this is the realm of the most professional traders.
Have you used perfect Renko Bars? You might read up them and identify the disadvantages and advantages they may have over traditional candlestick bars.
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