Median Renko charts, a modified version of the traditional Renko bricks brings a different view to the markets. Call it what you may, but I find the Median Renko charts a ‘Heikin Ashi‘ type of version of the Renko charts. Trends are visually easy to see in this type of Renko chart thus making it somewhat easier to build trading strategies.
The mini-median line is nothing but a traditional median line or Andrews’ Pitchfork tool that is applied only to local pivot points. Unlike the traditional way of plotting median lines, the mini-median line is drawn using 5 – 7 bars at max by making use of local pivot highs and lows. You can purchase the Median Renko chart plugin for MT4 from here.
The chart shown below is a great example of a regular median line where we make use of pivot swing points, while the dotted median line on the right is a mini-median line.
This trading strategy is an evolution to the original and previous trading strategy using median lines mentioned here.
Mini-median line with Median Renko chart – Trading Strategy
- The first step is to identify a strong trend. A strong trend is where prices are continuously falling or rising. Once you identify such a trend, visually scanning the median Renko chart, using the Andrews’ Pitchfork tool, identify local pivot high and lows and plot the median line. The median line drawn would now be in the direction of the trend.
- We now apply the regular median line trading rules; which is to look for a median line failure, which usually occurs after the trend prevails.
- To identify the right median line failure, wait for the next resulting median Renko bar to close bullish. Once this is done, the next step is to buy at the most recent lowest open.
- For take profit, it is set to the local low of the median line.
In the first example, we see a sell set up after we identify the mini-median line within a 7-bar formation. The local high and lows are marked by the orange marker. Once this is set up, we simply wait for price action to evolve. At the top end of the rally, we notice a bearish median line. So, a sell position is taken at the most recent lowest open, while stops are placed at the high. For the target, we choose the closest local pivot high (marked by the green horizontal line).
After prices hovered near the entry point, price action eventually closed lower reaching our take profit level.
The next chart shows a buy set up where we see a bit different kind of a median line failure. In this buy set up, the reversal bar comes after the median line failure. In such circumstances, you simply enter with a market order instead of setting a pending order.
This trading strategy is quite unique and as you can see, the set ups always offers a > 1:2 risk/reward set up. If you take your time and choose the trade set ups more wisely, this simply yet effective Median Renko scalping strategy can quickly double up your profits if you apply them to the Gold, Indices, Oil markets.
Frequently asked questions!
What markets does this strategy work best for?
I haven’t tried this out on currencies and limited this strategy to sharp trending instruments such as Gold, Silver, Indices CFD’s. The advantage here is that I can use a 5 point median Renko chart and still be able to catch a good trend without compromising on the spreads. Feel free to work this out on other markets if you are interested.
What Renko box size should I use for this strategy?
There is no silver bullet! You will need to experiment and demo trade a few times to get the right box size. Also, the box size will depend on other factors such as your trade size, leverage, risk management.
Does this strategy work on regular Renko charts too?
There is a bit of a chop that comes with regular Renko charts and also the reversals can be a bit misleading at times. The results are however greatly improved when using this strategy on Median Renko charts.
What Median Renko chart plugin do you recommend?
Spend a few bucks and buy this Median Renko chart plugin. It costs you only $35 if you want to use the plugin only for trading. (If you want to use the median Renko chart for backtesting, then it costs you $50)