Renko charts for intraday trading can be a great way to speculate in the short term.
While it is true that renko charts are independent of time, you can still use renko charts for intraday trading. Whether you are trading the forex markets or stocks or any other market for that matter, renko charts can be easily used for intraday trading.
But before we go further into the detail, we should get the readers expectation right.!
Using renko charts for intraday trading will not make you rich. The information such as price that you see on the regular candlestick charts or bar chart, is the same price that you will also see on the renko chart.
There are also a lot of things that you should factor it. Your trading strategy, the base chart time frame, the price moves of the instrument all play a role. In fact your risk management is also an important factor to consider here.
Traders need to come to terms with the above before reading any further. In fact, if Renko charts trading would really give you an edge in the market, then certainly there would quite a few rich traders already out there.
Having mentioned the above, renko bars can certainly show the price of the financial instrument in a different perspective. There are clearly some benefits when you make use of renko charts for intraday trading. But make no mistake. When you trade with renko bricks, you will still need to bring your A-game to the table.
So without much further ado, let’s get into the details in this step by step guide to getting started in using renko charts for intraday trading.
1. Find a good renko charting platform
It goes without saying, but having access to a good trading chart platform, and one that allows you to chart the renko bricks is important.
There are many options available for that. We will briefly touch upon a few example renko charting platforms that are available for traders.
Tradingview.com is no doubt one of the best renko charting platforms available. This trading chart platform is mentioned first because of the fact that it can be used as a standalone charting platform.
Therefore, regardless of whether you are trading with an MT4 or an MT5 trading platform, or even some bespoke trading platform, you can always refer to your renko charts on the Tradingview platform. We have a full review of how you can use Tradingview to plot renko charts here.
There is a small price to pay however. But if you are serious about day trading, then it is worth the investment.
The MT4 trading platform is no doubt one of the most popular and free trading and charting platforms out there. By default, the MT4 trading platform does not allow for the renko chart as a native chart type.
But the advantage with MT4 is that there are so many indicators and scripts that allow you plot the Renko charts automatically. Given the fact that you can also trade directly from the MT4 charting interface, it makes for a good choice.
In terms of price, the MT4 renko indicators is priced no more than $50 (If you are paying higher than this for a Renko plotting indicator on MT4, then do let me know. I would be keen to take it for a spin).
The MT5 trading and charting platform is the next version from the MT4 sibling. While this is advanced, the interface allows for better use of indicators. Therefore, you will certainly find better performance and improvement when using the MT5 trading platform.
But the downside here is that even with MT5, you will not get the native renko charts on the platform. This means that users are compelled to look for a third-party solution that allows you to plot Renko charts on MT5. You can read more about the MT5 Renko indicator here.
The NinjaTrader platform is widely used among serious traders. There is a cost for purchasing the Ninjatrader platform as a standalone. Alternatively, you can also get a free working version of the Ninjtrader platform when you sign up with a particular broker.
The Ninjtrader platform is widely used among futures traders. It allows for a native renko chart to be plotted, making it somewhat easier for traders to day trade with. However, there are still some limitations here. For example, the tails for the Renko bar is not displayed.
But fret not!
The trading community comes to your rescue. You can purchase the Renko indicator for Ninjatrader and starting using it straight away.
There are many more trading platforms that allow for Renko chart to be plotted in one way or another. We have a full list of the renko trading and charting platforms here. Now that we have an understanding of what trading platforms to begin with, let’s move to the next step.
2. Find what you want to trade with Renko
The next obvious question is of course finding the instrument that you want for your renko intraday trading. Renko trading does not limit you on the type of instruments that you want to use for day trading. It is essentially up to you to choose whether you want to trade forex, or stocks or futures or commodities. The main aspect being that you should know the instrument you are trading well enough. Below are some points to get you started with that.
Find a liquid enough instrument
What is important to note is that the instrument you want trade is liquid enough and that the minimum price fluctuation or price movement does not adversely impact your equity. Therefore, make sure that you do not end up trading on an expensive financial instrument such as a futures contract.
Pay attention to the tick size and value
Depending on how much trading capital you have, you might also want to make sure that you choose an instrument for day trading which doesn’t cost you an arm and a leg. Ideally it is good to stick to something familiar like a major currency pair.
A major currency pair has features of good liquidity and at the same time you can have full control (by means of the lot size) to keep a lid on the minimum tick size or the pip value for the trade.
Find an instrument with a decent trend
Another thing to bear in mind when choosing the instrument for day trading with renko is to ensure that it also has a good trend. Commodities usually have great trends. Prices tend to move in a steady trend for prolonged periods of time.
But of course, depending on the renko brick size you use, you can also capture short term intraday trends. The key to finding the perfect market to trade with renko charts is something that you are familiar with. So focus on the short term trend in the market!
You should have a good understanding and know the trend behavior of the market. And of course, you should know how much profit or loss you can make off that instrument.
3. Configuring renko charts
Once you have decided on the instrument that you want to trade, be it currency or a stock, the next step is to understand how to configure the renko chart. Now this is something that is unique for renko charts. Unlike the traditional bar chart or candlestick charts, with renko charts there is a bit more work to do.
ATR vs. Fixed box Renko?
And here comes the famous question of what box size to use or whether you should use the renko based on ATR (average true range) or a fixed renko brick. This is quite subjective and depends on factors ranging from how much risk you want to take to the financial instrument itself.
Let’s take the example of a stock such as Facebook.
We know that this stock is priced in the hundreds. Therefore, it makes sense to have the renko chart to make use of a fixed box size of say anywhere between $1 – $10.
The former being more ideal for lower capitalized traders while a $10 fixed renko brick will mean that you have deep pockets or ok in being aggressive.
Just to illustrate this point further, the above chart shows the snapshot of Facebook using a fixed size of $1 value, but using 15 minutes on one chart and 5 minutes on the other chart as the base chart time frame.
Base time frame for your renko chart
Another point to bear in mind when using renko charts for day trading is the base chart time frame. Typically, you are free to use any base chart time frame. if you don’t know what i’m talking about, read this article about the difference between using an M1 chart time frame and others as the base time frame chart.
But staying consistent with the day trading and renko chart, you can set the base chart time frame to be anywhere from 5 minutes to 15 minutes. Bear in mind that there will be some risks involved if you use smaller chart time frame.
The most important being that for stocks in general, gaps form at the open or sometimes during trading too.
Therefore be careful about such abnormalities (and the reason why we mention point #2 about knowing what instrument you want to trade).
To learn more about how to configure renko charts before you day trade, read this article. You can also watch this video I made, but limited to renko charts with tradingview.
4. Get your trading strategy ready to use with renko
The next step is of course to pull out that favorite trading strategy from your kitty.
Now generally speaking, any of your trading strategies or methods that works (when you are using indicators) on a candlestick chart will work with renko bars too.
However, due to the fact that renko chart tend to make use of closing price it is important that you pay attention to this. This in turn translates to paying attention to the renko brick size itself. Because in some ways, the larger the brick is, the more time it takes for your indicators to be reactive.
Besides the above, there are also some indicators that allow you to choose other settings besides the obvious.
A good example of this can be the Stochastics oscillator, or even the moving average. As you might know, for these indicators, besides the closing price you can also use the high, low, open and close. Therefore, when adding such indicators, make sure that you use the closing price.
The trading strategy you use renko charts with also needs to account for this. It is quite easy to get too engrossed with trading that you might end up swing trading instead. Therefore, make sure that your trading system is super focused.
Be familiar with your indicator(s) and be sure to backtest
If you are looking for ideas, you can check out the different renko trading strategies that we cover from time to time.
Of course, don’t just pick up a price action based such as support and resistance method for trading. Make sure that regardless of what method you use, your strategy should be backed by some evidence. This means that you should also possibly backtest your trading strategy if it comes to that.
Just make sure that your trading charts allow you to add indicators onto them. And it goes without saying that you should also be able to use your indicators on the trading charts. Some trading platforms do not allow for custom indicators (just saying…).
You can also look at other ways to trade such as analyzing just the renko boxes and looking at the price movements.
This can help you to trade purely based off price action. You can also use the regular methods you would use such as a momentum based trading strategy or any other profitable forex trading system that you think and know could work for you.
5. Learn to take profits and exit gracefully with renko trading
This goes without saying and this is something that is not specific to renko charts.
A day trader should know when to call it in, and when to stay in the game. All it takes a couple of winning trades to boost your confidence. And this little confidence boost can push your head into the clouds.
Therefore, when day trading with renko charts, you should be very very careful and grounded. Make a realistic profit target that you want to reach and a loss threshold that you are willing to bear. The moment you hit one of the two, exit the market.
Pat yourself on the back if you did good, or learn from your mistakes if you had losing trades. But one way or another, do not let emotions get the better of you. All it takes is just that next up brick on the renko chart and you might feel that you are in it already.
But the markets can be fickle and that up brick you just saw can quickly reverse direction and plot that dreaded red down box.
Therefore, having a firm grip on your trading psyche is important if you want to day trade successfully using renko charts.
How to use Renko charts to day trade – In conclusion
In conclusion, this guide should help you to get started in using renko trading for intraday. The steps included guide through the details of what you should prepare for beforehand. In fact, I recommend that you should first look at the renko charts during off market hours.
This will ensure that you are not distracted and at the same time it will also help you to plan for the trade. Yes, I did not cover the whole aspect of having a trading plan and a few other things. But this is something that I assume you already have thought about.
Day trading can be risky and just because you are using renko charts instead of candlestick charts doesn’t mean that you will have a better edge of beating the markets. At the end of the day, the market is right.
The renko bars at best will help you to focus on what matters most, which is the price itself and the price movements that come with the instrument you are trading.