Invented in Japan, candlestick charts have become the de facto standard for displaying price movement on all popular trading platforms. For 200 years now, their patterns have been bringing stable profits despite High Frequency Trading (HFT) and other technical innovations. But they also have decent alternatives to how signals work for binary option, such as Renko price bars.
Even though the timeline of graphs is present in all terminals, in reality, it makes practical sense only for fundamental analysis. All news free binary options signals and strategies, unlike Renko, are tied exclusively to time, without analyzing how price behaved before or after the release of the fundamental event.
Periods of increased activity at open/close and overlap of trading sessions, when options trading signals show numerous sharp price impulses and indicators start giving mostly false signals, also last for a limited time and can also be classified as fundamental.
With technical and graphical analysis, the situation is reversed - the market is entered according to price data. It doesn't matter how long it took to form a pattern, cross the moving average, enter the oscillator into overbought/oversold zones, or the appearance of new auto binary signals. In this case, the time factor can be completely ignored on a "synthetic" chart such as point and figure or Renko.
The principle of building bars
In Japanese, Renko means "the quiet path" and the chart element is called "brick". A new "brick" or options trading signals appear on charts only if price movement has exceeded set values. Two parameters are used:
- Bar size or threshold. The number of points that price must pass for the appearance of a new "brick".
- Calculation price. The default is Close. On lower timeframes, High/Low can be used. In an ascending bar, if the difference between the previous high and the current price is equal to or greater than the threshold, for a descending bar we calculate the difference to low.
All bars have the same size, if the price has passed the value above the threshold, live trading signals appear. On a strong trend, several bars may appear at once. Recall that time is not taken into account; therefore, the longer price does not move or moves in a narrow sideways range, the greater delay from candlestick charts.
New Renko bars are displayed at an angle of +45 degrees for ascending and -45 for descending. After they appear on the chart, they are not deleted or redrawn.
As you can see, the process of market analysis is simplified. For example, on one-minute Forex charts, a trading day consists of 1440 candles, at the same time, according to the Renko method with a threshold of 10 points; we get an average of 20-40 bars. You can option trading signals similar to Moving Average with long periods - a change in direction will signal the beginning of a new medium-term trend.
On timeframes older than M30, removing “noise” using Renko also has a negative effect - you can skip good entry points for pullback and countertrend trades. Also, charts will not work correctly if tick volume indicators are used.
Thus, the main task of a trader is to choose the right value of bar value, especially if it binary options free. The starting point for the charts will be to calculate average volatility over the last 15-20 days of asset's movement. Next, you need to decide on the strategy used - for scalping and intraday ones, you should focus on 5-15 points, and for medium and long-term ones, you can increase it to 20-40 points. For each asset, the values should be selected separately, depending on its characteristics and trading time.
Example of trading strategy
We will trade intraday for cryptocurrency without using candlestick charts. In addition to the Renko, you need to set the MACD oscillator (standard parameters) and complex oscillator "Stochastic RSI" with a period of 28.