Do you sometimes think there surely needs to be a greater solution to discover trends available in the market?
And do you always end up frustrated by multiple, contradicting signals — as a result of candlestick patterns?
Or have you ever ever been in a trade and felt “Yes! This is unquestionably the time to exit the trade!”, just to observe it painfully move back within the direction of your original idea, occurring to change into an enormous winner?!
Don’t worry – I even have too!
Luckily for you, I even have an answer… Renko Charts!
Renko charts are a hidden gem on Tradingview.
Here’s what you’ll learn in this text:
- What Renko charts are.
- Easy methods to use them effectively.
- Easy methods to easily find clear trends.
- Easy methods to capture big winners using Renko charts.
- How Renko Charts remove noise from the market.
- Identifying your favourite chart patterns with ease.
- I may also show you a pleasant moving average strategy so that you can test out.
Join me in learning tips on how to never exit a trade too early again and switch your small winners into massive ones!
What are Renko charts?
Before I start the fun stuff, it can be crucial you recognize where to search out Renko charts.
Let me show you…
First open Tradingview.
At the highest of Tradingview, you will note something like this…
Select the candlestick or whatever chart type your chart is currently on.
If you click the highlighted icon, you will discover this window…
Down in the underside half, you will discover the choice for Renko.
Select ‘Renko’ and your chart will look something like this…
Now you’re good to go!
So let’s begin by what Renko Charts are.
Chances are you’ll be asking what the foremost difference between the Renko bricks and candlesticks is and if Renko bricks are even price using or learning about.
The honest answer is a powerful YES!
Renko bricks might be a game-changer in your trading.
Renko bricks only form if the set brick size is reached in a set timeframe, unlike candlesticks that form irrespective of the value on the close of that timeframe.
I promise you’ll understand by the top of this text.
Renko bricks are formed as the value moves either up or down a set variety of pips, cents, or dollars (Set by you!) in a set time period.
Let me explain…
Consider each brick as a constructing block on the previous brick.
Every time price moves higher compared to the previous brick, the constructing gets higher, making a nice uptrend.
Nevertheless,
Bricks are only formed if the value closes at preset values inside a set time period.
Let me show you an example of a Renko chart…
In this instance, the time-frame is ready to Every day and the Brick size to 50 pips.
So.
You may see that each time the value moved up 50 pips it formed a recent brick.
Which means, if in at some point the value closed 150 pips above yesterday, three recent green bricks could be formed, printed one after the opposite.
The multiple bricks are printed , upon the close of the set timeframe – on this case, a day.
Nevertheless, if the value moved 180 pips in at some point, still only three bricks could be formed, as you would wish 20 more pips to achieve the required 200 pips for the fourth brick to be created.
With me up to now?
Now, it’s possible that the remaining 20 pips could form the following day, and in that case, that next brick would form – so long as the close price remains to be at that level or higher at the top of the day.
OK, I do know what you’re considering…
“Rayner, how am I meant to know the way big to set each brick size to? Each chart is different!”
That’s query but don’t worry my friend, I even have an answer for you!
You will want to go to Chart Settings by right-clicking the chart and choosing Settings…
Then select the Symbols tab and also you can be met with this table…
Renko bricks will be set to ‘Traditional’ or to ‘ATR’.
ATR (Average True Range) is an awesome solution to set Renko bricks without having to regulate the normal value each time you turn charts.
ATR takes the previous 14 candles ( this will be adjusted) and uses the Average True Range to find out recent brick sizes.
This will be helpful as it might always adapt to changing market conditions.
It also means that you can switch from Forex, to Stocks, to Cryptocurrencies, and so forth, without having to undergo the painful technique of determining what brick size most closely fits each individual asset or currency.
After all, I still invite you to check out the normal values too, and see what works!
How Timeframes Affect Renko Charts
It’s important to do not forget that time frames still play a component in Renko charts.
Within the examples above I even have set the time-frame to Every day. This implies bricks can be printed and formed only on the every day close.
In the event you were to set the chart timeframe to Hourly, bricks would form every hour and if you happen to are using ATR it will change the worth at which each brick size will occur.
(Lower time frames = lower ATR = lower brick size)
This might sound confusing but let me show you…
Example – AUD/USD Every day Renko Chart:
In this instance, I even have highlighted the ATR value for you.
You may see on the Every day timeframe the Average True Range is 0.007. This value in pips is 70 pips. Which means on a mean day, in keeping with this chart, the value ranges 70 pips.
In the event you take a look at AUDUSD on an Hourly chart, look the way it changes…
Example – AUD/USD 1-Hour Renko Chart:
On average, the hourly close price ranges around 15 pips. Due to this fact our ATR value is ready to 0.0015.
This implies bricks can be a size of 15 pips and print every hour, versus 70 pips on the every day close seen previously.
Hopefully you’ll be able to see why using ATR takes plenty of the guesswork out of determining brick size!
It also shows that Renko charts will be used on all timeframes.
Read on to search out out more about how it is a powerful tool for any trader.
How Renko can assist Discover trends
Now that you recognize how Renko actually works, you’ll be able to begin to know what its true advantages will be.
Trend identification is made rather a lot simpler with Renko charts, as shown here…
Example – AUD/USD Every day Renko Chart:
You may clearly see the lows and highs form and the Renko chart bricks provide a transparent visualization of what direction the trend currently is.
If you see multiple green bricks form, protected to say it’s in an uptrend.
If plenty of red bricks form one after one other, it’s almost definitely in a downtrend.
And eventually, if you happen to see only a couple of red bricks then a couple of green bricks it could be protected to say it’s in a spread.
As you’ll be able to see, Renko charts make it very easy to discover trends, with none of the clutter of indicators akin to moving averages.
In reality, I feel any trader would have the opportunity to take a look at a Renko chart and let you know the direction of the trend.
Let’s dive deeper, though!
Trading with the trend!
Have you ever heard the saying, “The trend is your friend”?
Well, if you happen to are a trend trader, I’m sure you recognize it is important to capture the total trend as an alternative of being stopped out by market noise, right?
Luckily, Renko charts provide the proper platform to capture full trends.
The advantage of trend Identification with Renko is that it provides an awesome trigger for when trends could also be losing momentum.
Let’s take a look at an example of how you should use Renko charts to stick with the trend….
Example – EUR/CAD 4-Hour Renko Chart:
Say you’re using Renko charts with a support and resistance type approach for this chart
Let’s also say after a little bit of backtesting and evaluation of this pair, you ought to exit the trade after two Renko bricks form against your trade.
You may see that if you happen to exited in the primary try to turn resistance into support, you’ll only get a small profit.
But when the support is hit again Renko means that you can capture the large trend while removing the noise of candlesticks and volatility from news events which may follow
When combined across multiple timeframes, Renko charts are subsequently a strong tool for capturing nearly all of trends before momentum begins to shift.
After all, you won’t at all times capture 100% of the move, but with Renko charts, it’s made much simpler and safer to discover your entry and exit points!
How Renko removes the “noise” of markets
Have you ever ever checked out a chart and felt overwhelmed with information?
I feel everyone has, my friend!
Candlesticks are great for supplying you with detail however the downside of that is typically the chart has way an excessive amount of noise on it.
A pinbar here… a double bottom there… engulfing this… but this level contradicts this level…
I wish to call it Evaluation Paralysis.
Sometimes an excessive amount of information can prevent you from taking the selections you need to make.
Well, Renko charts really simplify this by removing all the noise of the market.
Have a look at this chart below…
Example – GBPCAD 4-Hour Renko Chart:
And now take a take a look at this one…
Example – GBP/CAD 4-Hour Candlestick Chart:
Which chart is less complicated to follow?
This is identical pair through the same time period…… but I do know which chart I’d relatively be !
Clearly, when attempting to make rational decisions with a transparent mind, the clutter has to go.
Renko charts means that you can observe the market with clear, clean charts.
As you’ll be able to see above, less is commonly more.
While attempting to discover trends or exit and entry points, less clutter could make those decisions way more straightforward.
Now that we’ve cleared things up a bit, let’s take into consideration identifying some patterns.
Renko and chart patterns
Support and Resistance
As I stated previously, sometimes the market shows plenty of noise which makes it difficult to attract clear, well-defined levels.
Renko charts enable you to take a look at levels through a recent lens…
Example – USD/JPY 1-Hour Renko Chart:
As you’ll be able to see on the chart, price rejects these key levels.
Drawing the support and resistance zones lets you search for rejection or reversal patterns in key areas while removing the noise of the market.
Here’s one other quick tip though!
You should use the Renko chart to research key levels then switch back to your candlestick chart to search for entry candles.
This cleans the chart to search out clear support and resistance levels but then also means that you can switch and wait for certain patterns or candlesticks in your area of value!
Let’s take a look at a couple of more examples.
Chart Patterns
Typical chart patterns are also much easier to identify using Renko.
Because Renko charts remove plenty of noise, pattern identification becomes much simpler…
Example – USD/JPY 4-Hour Renko Chart:
In the instance above you see price form a head and shoulders pattern at the highest of a trend.
The break of support or the neckline was an awesome opportunity to short the market and ride the trend down.
This also goes for other patterns akin to double tops and double bottoms.
Got it? OK, well, moving on…
Easy methods to use Moving Averages with Renko charts.
I’m sure youl know that when using technical evaluation techniques, you’ve gotten a a lot better probability of success when using multiple tools.
Moving averages with Renko charts offer you a robust platform for entry and exit triggers.
I need to point out you an example so which you could begin to explore this more for yourself.
Let’s take a look…
Example – GBP/CHF 4-Hour Renko Chart:
Above is a chart of GBPCHF, on the 4-hour timeframe. The moving average chosen for this instance is the 20MA
You may see that there’s a clear level of support, which is being waited on to fall below.
Once the value falls below the support level and is under the 20 moving average, you’ll be able to enter a brief.
As you’ll be able to see, although green bricks occur through the downtrend, none of them close above the moving average.
This will keep you in a trade that has plenty of momentum behind it for longer while exiting you out of the trade at the most effective time possible as price motion shifts.
It’s a main example of letting your winners run!
Go and play with different moving averages and ATR values to search out out what works for you!
OK, so let’s break down the advantages…
The Benefits of Renko charts
It’s Easy to Discover Trends
Within the above examples you’ve gotten learned that Renko charts allow for trends to be way more easily identified
It’s Easy to Discover clear levels of Resistance and Support
Support and resistance levels change into much clearer, even when Renko charts are only used to search out these initial zones before switching back to your selected chart type.
There’s Less Noise
Sometimes less is more when attempting to clarify decisions. Renko charts do a tremendous job at removing the day-to-day noise of the markets that you sometimes find on candlestick charts.
They’re Highly Customizable for every Asset
Renko Charts let you customize each pair to suit your personal trading styles, timeframes, and techniques.
Renko charts are extremely customizable relating to setting brick sizes through the normal approach to a set value or using the more modern approach of ATR.
They Can still be used on Multiple Timeframes
Because they’re customisable this makes trading using Renko charts on any timeframe possible.
They Give Accurate Entry and Exit points
Finally, Renko charts offer you the chance to make use of them alongside your traditional candlestick charts.
Renko can assist discover trend shifts early with changes to brick colors which means that you can then search for candlestick patterns and more precise entry or exit points off the candlestick chart.
For instance, you could possibly potentially enter a trade using your typical candlestick or line chart after which switch to the Renko chart to see when the trend is starting to shift against your trade.
This means that you can capture more profits than if you happen to were to only use your candlestick or line chart.
After all, no evaluation could be complete with no look into the downsides so…
The Disadvantages of Renko charts
They Can Give False Signals
Like most tools in trading, there are at all times limitations to what Renko charts can do.
It’s important to know these limitations so you’ll be able to more accurately make strong trading decisions.
In choppy markets Renko charts can provide false signals, printing green bricks after which red bricks one after one other as price moves in a spread.
They Provide Less Information
In the event you are a trader that requires plenty of information from the chart, Renko charts won’t be for you.
Renko’s key profit is removing the noise, but in doing so it removes information that could be invaluable to a trader akin to candlestick patterns.
They Can Form Multiple Bricks Before the Close.
One other downside of Renko charts is multiple bricks will be formed directly.
This implies it’s possible you’ll be stopped out too late or the value can have moved too distant for entry depending in your strategy by the point the blocks are created.
Brick Size Can Be Tricky
I also need to remind you that brick size could be optimal for past data, but that doesn’t necessarily mean it is perfect for future data.
Market conditions change and subsequently a brick size of 15 pips can have been optimal up to now but won’t necessarily be optimal in the long run.
Conclusion
Well, there we’re, my friend!
Renko charts are a useful gizmo on Tradingview that I feel will not be discussed enough!
Hopefully, you’ll be able to see there are some great advantages to using Renko for any trading style.
Renko charts are extremely customizable and straightforward to read and understand.
They work on all timeframes and might even work along with your traditional charts akin to candlesticks and line charts.
On top of that, trend Identification becomes much easier using Renko charts and this makes timing entries and exits of your trades a much less stressful experience.!
Don’t forget to experiment with different values and techniques to optimize Renko charts in your trading strategy… higher yet, let me know!
How do you think that you should use Renko charts to level up your trading today?
Comment below and let me know the way you utilize Renko charts!