Cryptocurrency Trading Strategies Using Renko Charts


Cryptocurrency Trading Strategies [Renko Charts]

Renko Charts are another way to trade cryptocurrencies that are easy-to-apply and mitigate risk. They’re quite similar to the candlestick charts I discussed before and are easy to use to predict the future of the coin’s worth. The main idea is to analyze the past so that it can be used to tell the future.

A Renko chart consists of small blocks of renko candles. The name Renko is Japanese and it means bricks. Now a brick is drawn on a Renko chart consisting of time and value only when an asset’s value moves by a certain amount. The size of the brick is chosen by the trader and he needs to choose it according to the graph scale. Now the brick is only added when the graph moves by a certain amount that we know so it gives us a steady progress of the price impervious to fluctuations.

Also, to make things smoother, a Renko chart only charts closing prices at the end of a session. Now cryptocurrency has no closing price of the day unlike stock exchange which closes at 5 PM. So, we create our own arbitrary closing prices based on time milestones. You can make it after 24 hours, an hour or even ten minutes but you need to be consistent with it and the more volatile the currency the longer the wait for the closing price should be there. It is because with more volatility comes increased “noise” that is clouding the actual price of the coin. You need to cancel out the noise and that is what Renko charts are best at doing.

Here is the Renko chart of ZCash in November last year. The prices that were considered were on a 4-day basis. You can see that the size of the brick is small and the price fluctuated a lot in these few days. Green bricks are for price increases and red ones are for decreases.

Renko charts are extremely simple but trading techniques to be used with this chart are somewhat limited because of that. It also takes a lot of time to make sense from renko charts. These charts usually take a lot of time to form a new chart and trade using it.

Look at this Renko chart of Ether and Dollars on a weekly timeframe. You will see an increasing trend straight as an arrow. See what we have done here? We have cancelled the noise and looked at the data on a weekly basis and here we are.

Here is the ENTIRE history of BTC-USD on a four-hour timeline.

Amazing how you can look at things, no?


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