For years I have watched e-mini traders in sheer bewilderment as they preach price action then slap a 3-minute chart on the computer screen. My question is always the same; what does time have to do with e-mini trading if price action is the key to success? Of course I usually get a shrug and a comment like, “that’s how I learned to trade.” If price action is king, why don’t traders use bars that accurately present moves in price action?
For most of my career, I have traded bars that reflect price action, not time. Granted, there are certain traders who only take trades on the hour, or some other predetermined time; but it’s not terribly difficult to remember that on the hour there will be some extra price action, or maybe not. Quite some time ago, I did away with timed charts and started Renko, Range and Heiken-Ashi bars. Of the three, I prefer a modern variant of Renko Bars called Better Renko Bars. With Better Renko bars you get the standard renko bar plus the wicks that are unique to all candlestick bars. To be more correct, Renko bars are actually referred to as bricks.
Some features that make Renko bars unique are:
· They are entirely based on price action alone and they filter out the noise of traditional candlestick wicks. (though I prefer the newer Renko Bars with wicks, which take some adjustment when trading)
· They are great to confirm trends and can be traded as a stand-alone type of bar.
· If you are looking for very clear indications of support and resistance, these bars are second to none.
Renko bars trace their history to Japan and each brick is the same size; I generally set my bars from 4 to 6 bricks, depending on market conditions. With the standard bar set at 4, a new bar is painted every 4 ticks and there is never any overlap in the bars. Price may oscillate above and below the bar, but the bar will only paint when price has moved in one direction for 4 consecutive ticks. Voila! A great deal of noise is removed from your chart. They key to Renko bars is their property of only moving 4 ticks (or whatever tick setting you choose) in the same direction.
Range bars are very similar to Renkos in that they move a certain number of ticks in any direction. I often trade Range bars in a trending market as I feel like I can see more and understand the price action better. Heiken-Ashi bars use an averaging method in developing bar structure and take a good deal of practice before trading with real money. You can get fooled easily if you don’t know how to read them.
If timed charts are causing you difficulties in determining trends or all the extraneous movement of traditional candlesticks is confusing. Get rid of your timed charts and try Renko, Range, or Heiken-Ashi bars; you just might find a good deal of success.