Renko Chart Position Trading For The VXX Volatility Future

Renko chart position trading for the VXX volatility future and making the switch from a 60-minute bar chart to a Renko chart is currently being evaluated.  In order to do this, a chart style made from Renko bricks will replace the 60-minute bar chart that has previously been used.

The purpose of changing to Renko chart position trading would be for the additional chart and setup clarity that our Renko chart method can provide when compared to a bar chart.  This benefit was originally noticed when the decision was made for day trading Renko charts instead of tick bar charts.

Since this trading method change only began 11-15-2017, it is still being compared to the original position trading method.  But the change has worked well to this point.

What Is The VXX?

VXX is the symbol for the S&P500 VIX short-term futures exchange trade note [ETN].  The VXX is extremely liquid and essentially trades like a stock that can be bought or sold short during real-time or extended trading hours.

Additionally, the VXX has options, with monthly as well as weekly expirations.  This is important for our position trading method, considering that it is a method that will trade an underlying directionally, while trading options counter direction at price and/or momentum extremes.

Position trading the VXX has been quite profitable for 2017, with the price falling from 102.04 12/30/2016 to 28.19 on 12/16/2017 [split adjusted prices].  The trading position being short most of the time during the year.

Renko Chart Position Trading – Setting Up The Chart

If you are new to Renko charts, go to the following posts for an explanation for Renko charts and how the Renko chart bricks are made:

We are going to start VXX Renko chart position trading using a 25.  This means that each of the Renko bricks will have 25 ticks [or in the case of the VXX 25 cents] of movement to make a new brick.  This can be compared to a tick or minute chart, where there will be X ticks or minutes per each bar.

Also, we will change the VXX symbol properties to include extended trading hours, instead of only real-time hours.  When you look at the Renko chart the real-time hours are the red and green bricks, where the extended hours are shown by the gray bricks with the red and green outlines.

Renko Chart Position Trading For The VXX Volatility Future

As you can see on the Renko 25 brick chart above, the chart will also include our Renko method trading indicators:

  • Price envelope [ttEnvelopeR] – this is the indicator on the Renko bricks
    • NOTE:  I have made the adjustment for the upper and lower band parameter to 1.7
  • Fast Momentum [ttExtreme] – this is the yellow line indicator below the Renko bricks
  • Slow Momentum [ttMEx] – this is the blue-purple line indicator below the Renko bricks
    • NOTE:  One change that has been made to our Renko method indicator layout is to use ttMEx instead of ttMExR – this has been done because it is a smoother momentum indicator, which seems appropriate for position trading -vs- day trading

You can learn more about the Renko method trading indicators and related trade setups throughout the website, especially in the training videos if you are a group member.  Here are links to 2 posts that discuss these in depth:

Renko Chart Position Trading Video1

The first Renko chart position trading video is meant to be an introduction to differences in trading with a Renko chart and the 60-minute bar chart.

Here are some of the points that the video will focus on:

  • Renko chart position trading for the VXX volatility futures introduction
  • Renko position chart layout discussion for TradeStation and for NinjaTrader, along with differences between the charts for each of the platforms
  • Discussion of why position trade with Renko charts instead of the 60-minute bar chart as we have been doing – including chart clarity and lack of ‘noise’. along with further ease of seeing the trade setups
  • Differences between the Renko day trading method and Renko position trading and changes that need to be considered, especially for price identification and the price extreme reverse trade setup
    • There are big differences and implications when position trading a 25 brick chart and day trading a 3-4 brick chart
    • Understand that if there is a brick that moves 24 ticks and then reverses and completes in the opposition direction, then a price 24 ticks higher than the last completed brick will not show on the chart

Renko Chart Position Trading VXX Futures Video

Renko Chart Position Trading – 60-Minute Bar Chart Trading

The following chart compares the Renko 25 brick position chart to the 60-minute bar chart.  Can you see the appeal of the Renko chart and why it is said to have less ‘noise’ than a bar chart?

Renko Chart Position Trading For The VXX Volatility Future

Position trading using the Renko chart began with the 2 yellow circles on the left side of the chart.  These were ‘base’ Renko method trades:

  • Trade1 = price envelope reverse sell
  • Trade2 = midline reject with mex flow and a fast momentum hook

You can see how these Renko chart trades compare to the 60-minute chart and the yellow bar, where there would be no VXX short trade setups.  However, there would be VXX option trades done at that point, counter to a long VXX that was being trailed.

The first sell setup on the 60-minute chart is the yellow circle, which coincides with the yellow dot on the Renko chart.  This brings up an interesting question and possibly additional position trading potential.

Can we position trade the Renko chart and 60-minute chart in combination, and use that sell setup for an additional addon trade?

Renko Chart Position Trading Video2

The second Renko chart position trading video first discusses the differences between the initial Renko trade[s] and how they would compare to the 60-minute bar chart if that was being traded.

Additionally, this position trading video focuses on:

  • Comparing the Renko and bar chart at the time of the first trade and deciding to do a synthetic short options trade, against what would have been a long position
  • Then a Renko midline reject sell setup and what would typically be an addon trade was done as a VXX short – BUT what if this addon setup didn’t occur and the initial sell wasn’t traded?
    • You would be short the VXX via an options synthetic sell after the open long was closed – this is a key component of our position trading method, where an options trade can hedge an open trade and then become a direction trade
  • Discussion of trade management and differences between Renko position trading and Renko day trading, where it doesn’t seem consistent to use the 4 brick day trade profit for position trading
  • Discussion of the price extreme reverse Renko method trade setup used in day trading and whether it is appropriate to be used for position trading
    • Possibly for an options trade and for a VXX trade profit BUT it would need some further setup components than trading the first counter brick after a 5+ brick move, for instance, I certainly wouldn’t want to use this as a trade entry against mex flow or in the ‘middle’ of a swing diagonal with a price target

Renko Chart Position Trading VXX Futures Video

 

Renko Chart Position Trading Training

Member’s Section:  Renko Position Trading Training Videos

 

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