The shorts would be continued to kept open as long as future bearish Renko bricks continue to form, with stops trailed one or two Renko bricks above price.
Stochastics cross over near the 80 level. In the following chart below we have a simple 5/10 EMA cross over method with Stochastics confirmation applied to the Renko charts.Īt the arrow marked on the chart, the 5/10 EMA cross over method is very easy to trade with Renko charts. Traditional indicators can also be applied to Renko charts such as Moving averages, Bollinger bands and even oscillators such as the RSI, CCI and so on. After the double top was identified, sell positions could be initiated near the support targeting the rest of the price action. This kind of precision is something that requires a second or even a third look at traditional charts. The following chart shows a double top formation, which is very clear to the eye. Price rallies back to the support line to retest it for resistance, which makes it an ideal price level to short targeting the most recent minor support level. We see a support level being established which was broken later. In the following chart, we notice how the support and resistance lines are easily spotted on the chart. When the trend line is broken, a trade can be entered, targeting the immediate previous support/resistance or pullbacks for booking profits. We notice a minor downtrend in play and plot a trend line connecting the pullbacks. The chart below shows how a trend line break method can be applied to the Renko chart. There are many Renko trading strategies, but here we outline a few of the simplest Renko trading strategies that traders can use. Also when a trade is entered, time is no longer a factor for the stops or the target levels to be reached. The only downside to using Renko charts is that if price moves in a tight range, the Renko chart is not updated with any new bricks. Fibonacci levels are easy to identify ( What is Fibonacci Trading?). Harmonic trading patterns like Gartley, Crab, Bat, etc can be easy to spot. Traditional chart patterns such as Head & Shoulders, ascending descending triangles, double tops and bottoms and so on are easy to trade. Therefore trends, support/resistance are easier to spot with Renko charts Renko charts are pure price action based charts. The Renko chart below illustrates the above with an example of 10 Pip Renko chart. In other words, a bearish Renko brick is plotted when price drops to 1.2995, from 1.3005. For reversals, price has to drop twice the Renko box size. Likewise, for further 5 pip moves, new Renko bricks would be plotted. 
For example if we use a 5 pip Renko box size on EURUSD, and if price was currently trading at 1.3000 and price moved to 1.3005, a Renko brick would be plotted. Bullish price is plotted with a Green Renko brick and a bearish price is plotted with a Red Renko brick. How does the Renko Chart work?Ī Renko chart works based on price action. For forex markets, using a 5, 10, 20 pip fixed Renko box size is ideal. An ATR is usually ideal for creating Renko boxes for stocks. The ATR method for fixing the Renko box size is used so as to capture the current average true range of price. So a box size of 0.0005 would infer a Renko chart with 5 pip box size or 0.005 would be a 5 pip box size for a Yen pair.īesides the fixed box size, Renko charts can also be configured to dynamically use the ATR value. The Renko chart can be configured to adjust the box size. The chart below shows how the typical Renko chart looks like. Unlike other chart types such as Candlesticks or line charts, where price and time is considered, with price plotted on the y-axis and time on the x-axis, with Renko charts only price is considered.
Renko charts take into consideration only price and therefore considered to be pure price action charts. The word, Renko comes from the Japanese word of Renga for Brick and that is how the Renko chart is formed, in bricks or boxes. Renko charts are as ancient as Candlestick charts, and are yet another contribution by the Japanese. Renko charts are a form of chart types, besides the frequently used Candlestick charts, line charts and the OHLC bar charts.
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