From Renko to Range Bars

It’s been a long journey these last 3 years exploring countless ways of looking at the charts and spending literally months backtesting various systems and setups. I’ve spent a lot of time evaluating Renko bars and even designed some ea’s as you can see on this blog. Unfortunately the designs were not good enough to weather all of the market conditions.

This year I’ve been relatively quiet on the blog but I’ve been busy in the laboratory. I’ve developed a “kinship” with Range Bars. I must say that I’m a huge fan. If you’re not familiar with Range bars, they were invented by a Brazilian trader in 1995 who was frustrated with the increased volatility of the stock markets there and wanted to filter out the noise.

Each Range bar represents an equal amount of movement from the low to the high. So if you setup your Range bars for 10 pips, then each bar (or brick as we like to call them) will be 10 pips. After the new bar opens, if it’s a 10 pip bar it will close 10 pips away from the open in either direction.

I remember when I first saw Range bars and compared them to Renko, I couldn’t see anything good about them. I remember thinking that I’d rather trade time bars over Range bars. It wasn’t until I became totally disenchanted with Renko bars that I gave them a closer look, and I’m glad I did.

So, why was I fed up with Renko bars? I wasn’t happy with how each brick could go against you by twice the amount of pips as the brick without showing in the charts. I found this very challenging for creating systems with a tight risk to reward ratio.

Learning Range Bars is like learning a different language, it’s difficult at first but the more you study them and practice the easier it gets. I recommend watching this video by Pro Trader Ed on Range Bars.

I’ve discovered that they do cut down on a lot of the noise and I discovered a very profitable way to trade them. A lot of professional traders use Range bars and now I see why.