Sentiment Indicators - Renko, Price Break, Kagi, Point and Figure: What They Are and How to Use Them to Trade

Chapter 8. Renko Charts Revived: The Microdetection of Sentiment

"Taking into account the characteristics and behaviors of one's adversary is essential for success in any competitive activity, such as in sports, business, or warfare."^[8]

People have used many metaphors to describe trading. They have referred to trading as a "war" in which there is a battle between bulls and bears. Within the military mind-set, the trader can be a warrior, gladiator, or sniper. We often hear sports metaphors; for example, traders are likened commonly to surfers. All of these metaphors are important because they provide insights not only into how traders act, but also into how they learn, and improve, their trading.

Traders bring metaphors about trading from their own life experiences. Engineers try to model the market. Doctors try to diagnose the patterns. Musicians attempt to listen to the market's rhythms. All of these are valid and help the trader. When it comes to the phase of trading that deals with protecting profits, the trader enters a zone of combat, so the adversarial metaphor works well. The role of the profitable trader is to protect his profits, and the weapon is Renko bricks.

Before we focus on Renko bricks, let's quickly review where we just left off: price break charts.

We applied price break charts to detecting the beginning of a trend. Their essential feature is their ability to project the resumption of a trend after a retracement. To a great extent, price break charts improve strategies ...