Wyckoff on Renko

[Caseynotes]

Quick study on Wyckoff using Renko charts which are particularly good at highlighting the basic principles of price behaviour as described in the Wyckoffian Logic chart and demonstrated on the Renko 5 point block charts below.

The key start point is supply and demand levels, this is where periods of consolidation tend to form, where buyers and sellers are evenly matched and price has no reason to move. At some point there will come an inequality and price will be forced to move to a new level either up or down (range expansion) to again match buyers to sellers. The Wyckoff model can signal the start of a new range expansion phase from a period of consolidation and highlight the best times to enter a trade to catch the ride (breakout retest, failed dip, continuation breakout). 

I start off with a text description of basic price behaviour which I had posted in another thread recently.  

 

"Your experiences as a new trader are not uncommon and caused by an over reliance on indicators most of which are based on past performance and encourage late execution which carries an increased risk of entrapment. It's worth looking at how price actually behaves to help anticipate what will happen next.

Consider that price can only move up or down between supply and demand levels, if the chart is moving sideways it is time that is moving not price. 

S/D levels tend to be used over again because they are obvious levels on a chart for buyers (demand) and sellers (supply) to congregate.

These levels  are related to support and resistance levels and are identifiable on the chart.

You will know when price is on the move between levels because there will be a series of higher highs and  higher lows (upward range expansion) or lower lows and lower highs (downward range expansion).

So once you have identified the direction of travel and the most likely target areas there only remains finding an opportunity to get in. Using an upward range expansion as an example, that will be either at a failed dip (a higher low) or a break out past the prior higher high.

If the trade takes off trail your stop.

Be ready to disembark at the target level but wait for signs of reversal first because price might just break straight through on towards the next level up instead.

Obviously this is bare bones stuff but a good basis to build on."

 

Key points of the Wyckoff chart;

1/ period of consolidation, often at 'support and resistance' (which is related to 'supply and demand' and 'accumulation and distribution').

2/ retest of rectangle breakout.

3/ failed dips and continuation breakouts on route to next level.

Key points of the Renko charts;

1/ independent of time.

2/ points per block (5 point blocks with tails in this example).

3/ the second Renko chart is to highlight that the same set up can occur repeatedly throughout the day.

4/ increasing the Renko block size has the affect of increasing the time frame where the same patterns can be seen.