I want to start this new year with one of the most important decisions that need to be taken when you decide to move from time based charts to no-time-based ones.
It’s like deciding which timeframe is best to be traded on a particular instrument.
Like for timeframes it all depends on the kind of trading that you want to do. You can use small boxes size (a very few pips like 2 or 3) for scalping. More for medium term trading and tens of pips for longer terms ones.
For an average calculation I use a simple yet quite effective method.
I open a H1 chart of the pair I want to trade. I apply an ATR (Average True Range) with period=24 to it. And then I apply a 120 period simple moving average to the ATR. Doing so I calculate a sort of weekly average volatility. The value of the moving average of the ATR can be something like 0.0014 which means 14 pips.
I use to round that value to the closer 5 pips so if I have a result of 14 pips I use 15 pips, if I have 12 pips I use 10 and so on.
Let’s see what’s the actual “best” box size for some of the pairs commonly used:
- AUDUSD 10 or 15 (13)
- AUDNZD 15 (15)
- EURCHF 10 (8)
- EURGBP 10 (9)
- EURJPY 20 (18)
- EURNZD 30 (30)
- EURUSD 15 (14)
- GBPCHF 20 (18)
- GBPJPY 25 (23)
- GBPUSD 15 (17)
- USDCAD 10 (12)
- USDCHF 10 (11)
- USDJPY 10 (11)
For Gold you’ll have higher values like 3.49 that means 349 pips ($3.49 boxes). And here are value for some commodities:
- GOLD 350 (349)
- SILVER 10 (9)
- OIL 20 (19)
We are trying to develop a special version of Renko charts with box size automatically adapted based on the above solution, so to have ATR based Renko charts on MT4 😉
That’s all for today and I hope you’ll enjoy trading on Renko charts.
In the coming days we’ll release the first “tools” for trading no-time-based charts 😉
Have a great 2014!
Andrea and Paolo