Can someone please challenge this idea in its simplest form.
Using Renko charts will show me moves in price with the time element removed.
My strategy is the following:
Set Renko bars to 50 pips.
If last bar was movement up, then you need to be in a buy position for the next bar.
If last bar was movement down, then you need to be in a sell position for the next bar.
If already facing the right way, don’t trade again.
If facing the wrong direction, reverse your position.
The simple logic is that in a trending market, you are going to see far more structured moves in one direction, rather than a choppy, undecided movement (it can be adapted to add in SMA etc for other trend indicators). However, even with whipsaws, and no other indicators, it can work.
The need to find the right brick/bar size and money management is also important. However, I’d invite your thoughts as to the success of this very simple strategy.
Renko charts look appealing at first. All of those trending bars lined up in a row.
But once you realize that it takes a movement twice the box size to form a candle in the opposite direction, they quickly lose their magic.
This strategy will probably work okay in a trending market, but you will get torn apart in a ranging market. Which then leads to the problem of how to filter out ranging conditions. But you still need to catch the breakout of the range, otherwise you might miss the trend.
Renko (like most things) can be used successfully but it’s not as easy as it looks at first.
I’ve backtested a 50 pip box size renko strategy and they make lots of money in a trending market but you will get torn to shreds when the market starts to range as USDJPY has done this year. However, you could trade any strategy when the market is trending and make money.
IMO there is no edge in using renko because one could enter any market at any time with a 50 pip profit target and 100 pip stop loss and the odds will always be 66% (1/2). In my backtesting a down brick followed a down brick 67% of the time and an up brick followed an up brick 67% of the time. Take the spread into consideration and you’ll be lucky to break even.