How to trade renko charts successfully is probably a million dollar question every trader would ask!
After all, who wouldn’t want to learn how to build a successful trading strategy, using renko charts? Are you one of those people looking to learn how to improve trading with renko charts?
If you answered yes to the above, then you have come to the right place.
In this article, you will learn about the top five tips on how you can trade renko charts successfully. I assume that by reading this article, you already know how to trade with renko charts. I also assume that the reader has some basic knowledge of how to use trading indicators.
Is trading with Renko charts difficult?
This could be the very first question that comes to your mind!
Trading profitably with Renko charts certainly requires a bit of expertise and loads of patience. If you have been using renko charts, but applying the same trading strategies, they might not work. This is because of the unique way Renko charts are built.
Therefore, when you are trading with a chart type as unique as Renko, your trading strategy also needs a bit of tweaking.
Think of this way…
Would you drive your sedan in a forest or hilly area? Wouldn’t you prefer driving a 4×4 in such a place? The same logic holds true when you are trading with renko charts too.
So coming to the question of whether it is difficult to trade with Renko charts successfully, the answer is:
No! It is not difficult to trade with Renko charts profitably. You simply need to have a trading strategy that works with Renko charts.
Having cleared the air, let’s now go into the top five tips to help you build a successful renko trading strategy.
Renko Trading Tip #1: Short term or long term?
We will start with the obvious question!
When you trade using Renko charts, do you want to trade the short term trend or the long term trend?
This is an important question that you need to answer. You might ask, does it matter?
Well, certainly, the trend you want to trade matters, even more so with Renko bars.
Different traders will have different perspectives on the short term and long term trend. With Renko charts, when we say short term trend, we talk about two or three renko bars at best. Now imagine, if your Renko brick size was 20 pips. Targeting a short term trend with just three Renko bricks means a 60 pip profit.
On the other hand, if you want to target more, then a long term trend is what you should choose. This could mean that you will target a minimum of five renko bricks, if not more.
As you already know, renko bars are independent of time. Therefore, when you target the long term trend, you could end up swing trading.
There are pros and cons of swing trading, and it is up to you to decide what trading style suits you.
Pro Renko Trading Tip: If you are just starting with renko trading, then stick to a target of no more than three Renko bricks.
Renko Trading Tip #2: Indicators or price action or both?
Should you trade with renko charts using indicators or price action or both methods?
This is something important to consider if you want to trade with renko charts successfully. Each method has its own pros and cons.
With Renko charts, trading with indicators can give you different results, comparing to trading with price action or renko chart patterns. When you consider this, remember to keep in mind the Pro Renko Trading Tip #1.
The number of renko bricks you want to target will be either easy or hard.
Example of trading renko charts with indicators
Imagine you are using a long term and a short term moving average. The buy and sell signals with renko charts are generated upon the Golden cross and the Death cross.
When a clear trend emerges, you can get compelled to stay longer in the trade. But as you know, price can be fickle! Therefore, you could get caught in a retracement. This means having to hold on to your trade a bit longer. There is a significant risk now that your account will face a drawdown or worse!
Example of trading renko charts with price action
When talking about renko price action, you can use different methods. From just support and resistance to using chart patterns themselves. The advantage of chart patterns is that your risks and rewards can be measured up front.
This gives you a clear advantage.
But wait! What happens when you combine indicators and price action with renko charts? This is probably the best method you could use. The indicators will help you understand what the market is doing. At the same time, the chart patterns will help you to take measured risks.
Pro Renko Trading Tip:Try to find a trading system that uses just a few indicators and use price action methods to validate the trade.
Renko Trading Tip #3: Renko brick size matters
To be successful in trading with renko charts, the renko box size certainly matters.
If you think you can just blindly set a brick size and expect results, it won’t work.
The brick size that you set in your Renko charts, actually determines how much profit or loss you could make. It will also determine whether you will end up staying in a trade for too long or too short.
Remember what we talked about in the first renko trading tip? You can set out by targeting just three boxes. But if each of these renko bricks are 50 pips, then you are targeting 150 pips in total.
Is this an achievable goal? Sure, if the market you are trading is volatile and can move 150 pips on any given day.
Finding the perfect Renko brick size is an art and this is very subjective. For a trader with $100,000 in trading capital, they can afford to open a one lot on a Renko brick size with 50 pips each.
But for a trader with just $1000, even a 0.1 lot, trading on leverage can be risky. So when we say that the renko brick size matters, it surely does if you want to trade renko charts successfully. Now comes the question of how can you remedy this situation. You can start by reading on how to find the renko brick size.
The article gives you all the basics you should know regarding the Renko box size.
Pro Renko Trading Tip:A perfect Renko box size is one that allows you to make decent profits without putting pressure on your leverage.
Renko Trading Tip #4: Have the right charting platform
There are many charting platforms available these days. But not all of them offer support for native renko charts.
And some times, just because a charting platform is expensive, doesn’t mean that it will be advanced.
Having the right renko chart platform is important to a successful renko trading strategy. If you find yourself using a custom trading platform without much support for chart customization, then you could use Tradingview Renko charts.
The review there gives you a complete overview on how you can customize the renko charts. Alternately, I have also covered some good MT4 renko chart indicators as well.
Remember, it is important you have access to a good charting platform. Since renko charts are based out of the closing prices, having a technologically superior charting platform is important.
Renko Trading Tip #5: Patience and Money management
It goes without saying that to trade renko charts successfully, you need to have a lot of patience. Depending on your renko chart settings, the trade may be open from a few hours to a few days. Therefore, it is good to have your money management skills in place to help you with this.
Try your best to avoid keeping positions open overnight when trading with renko. But if you cannot avoid it, make sure that you are able to use risk management to open the most optimal trading lot size.
Is there a silver bullet to trade renko charts successfully?
There is no secret sauce when it comes to trading profitably with renko charts. Therefore, traders need to bring a mix of all the above skills.
You are already on a good starting point if you know the basics of day trading. Once you bring in the element of Renko bricks, you can simply fine tune or adapt your trading system accordingly.
With a simple trading strategy, and the above points, you can easily start to trade with renko charts profitably on a consistent basis.