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Charts

Charts Overview

Candlestick charts and their variations, such as Heikin-Ashi and Renko, offer powerful tools for technical analysis in financial markets. This page details these charts with relevant images and explanations.

Candlestick Chart

Candlesticks provide a complete approach to chart analysis, adding value when combined with Western techniques. Since they use the same data (open, high, low, close) as traditional bar charts, their insights can complement each other.

Candlestick Chart

Heikin-Ashi Chart

Heikin-Ashi Candlesticks filter out noise and capture trends by averaging prices over time. They help identify trending periods and potential reversals without relying on traditional candlestick patterns.

Calculations

  • HA-Close = (Open + High + Low + Close) / 4
  • HA-Open = (HA-Open(-1) + HA-Close(-1)) / 2
  • HA-High = Maximum of the current High, HA-Open, or HA-Close
  • HA-Low = Minimum of the current Low, HA-Open, or HA-Close

Long hollow Heikin-Ashi candlesticks indicate strong buying pressure, while long filled candlesticks indicate strong selling pressure.

Renko Chart

Renko charts filter out minor price movements, focusing on significant trends by using fixed box sizes (or brick sizes). A Renko brick forms only when the price moves up or down by the set brick size, and the time interval varies based on volatility.

Renko Chart Considerations

  • Backtesting: Renko bricks are formed after price movement, preventing inconsistencies in real-world trading.
  • Indicators: Certain indicators like VWAP and OBV may not work well with Renko charts due to the lack of volume data.

Renko Chart Example

During backtesting, trades are executed at the close price of the candlestick that generates the Renko signal.

Tip: Choose your Renko brick size based on stock volatility, target profits, and stop-loss levels for the best results.

Notes

  • ChartIQ Time Shift: ChartIQ shifts Renko bars by one time step, which differs from platforms like TradingView.
  • Backtesting Accuracy: Always avoid partially formed Renko bricks to ensure consistency between backtest results and live deployment.

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