Asking the question, what is the best Renko trading indicator probably isn’t going to lead to profitable day trading. I really don’t think there is a best indicator, regardless of the trading method.
However, if someone asked me about choosing the best Renko trading indicator[s] for developing a day trading method – that question I could answer. I would say to use a combination of different, but related Renko indicators that could be combined into a method trade setup.
You would then evaluate the effectiveness of the indicator combination, by seeing how often price would continue to a profit target, after your Renko trade setup gave you a trade. For instance, can your trade setups consistently make a profit 60% of the time or more, with you average winner bigger than your average loser?
My experience is that trade setup combinations are much more effective than single indicators, and I don’t know of a single trading indicator that would be as profitable. In that context, I think of Renko trading indicators as providing trade method setup information –vs- an indicator as a mechanical system.
Best Renko Trading Indicator Combination
We are going to look at what I have found as the best combination of indicators to use for Renko chart day trading.
We use a combination of 3 Renko day trading indicators – these are seen on the chart below.
Best Renko Trading Indicator Combination
These indicators are related in that they all give information about price momentum. And that is what I have found as the best Renko indicator combination for price continuation – a way of combining momentum into trade setups. Due to the importance of momentum and the way that it tends to lead price, our method will not take a trade against momentum.
The indicator on the Renko bricks is a price envelope above and below a moving average midline
The momentum component is what determines whether there are red dots or green dots showing, and when they shift from red to green or green to red
The 2 indicators below the chart are both momentum indicators
The yellow indicator is fast momentum and the blue-purple indicator is slow momentum
It is interesting to note that the slow momentum Renko indicator is a smoothing of the momentum factor that causes the price envelope dots to shift
And that is an example of what I mean about selecting related indicators that combine together to give trade setups
Renko Trading Indicator Combination Video
Price Envelope Reverse Indicator Combination
Now let me show you one our trade method setups and the Renko trading indicator combination for the trade:
Price envelope reverse buy
Fast momentum will have moved above the lower extreme and lead slow momentum
Slow momentum has crossed with the blue line on top of the purple line
Price envelope dots shift from red on top to green on the bottom
You can see how momentum led price as it reversed from the low extreme and went positive
Enter the trade with a stop at the high of the completed brick-1 tick limit into the next brick