Seeing the trend without Forex market noise is the goal of every trader. Too many times, traders get head-faked by the twists and turns of price action. I described in my previous article, Trading Trends with Renko Charts that traders can filter out the whipsaws and intra-market volatility to reveal trend direction.
In addition moving averages can be used to signal entries and exits as well. A couple of settings have to be changed in order to get the moving averages which are usually tied to time, to work with a chart system that is based on price.
First of all, Renko is a custom indicator that you have to download from FXCodebase.com. Here are simple steps you can follow to install the file called “Renko2.lua”. Once you have installed the indicator, you can choose it from the indicator menu. Set the “Step in pips” to 5 and choose the hourly time frame.
Note that since Renko bars are not time dependent, the time frame just dictates how many bars are loaded on the screen. The larger the time frame, the more Renko bricks will be displayed.
To add a 13-period exponential moving average to the Renko chart, choose EMA from the Add Indicator menu then change “Number of periods” to 13. Next, click the “Data Source” tab and highlight “Close” under the Renko menu then click “OK”
Learn Forex: GBPUSD Renko Chart with Moving Average
(Chart Created using Marketscope 2.0 charts)
Notice the chart above which displays both Renko bars and a 13-period exponential moving average. A simple system can be built around the Renko bars and the moving average. When Renko price bars cross below the moving average and turns red, traders can enter short and stay with the trend until the Renko bars cross back above the moving average.
An initial stop could be placed just above the last blue Renko brick. Keep in mind that in the above example, each brick is equal to five pips. In the above example, the red circles mark where the Renko bars crossed below the moving average. A trader can see that a number of pips could have been gathered as the bars stayed below the moving average.
On the other hand, when the Renko bars change color and cross above the moving average, traders can enter long placing stop just below the last red Renko brick. The above chart shows in the green circles, points were the Renko price bars moved above the moving average generating a clear buy signal.
Renko charts, without the dimension of time, may take a little getting a little used to. But once you get the hang of them, you may find it difficult to go back to the candles. Adding a moving average gives excellent signals for entry and exit. Marrying them up with other indicators can magnify the benefits of trading without noise and scary wicks!
Source: http://dld.bz/cS2md
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