Hey Everyone, my name is Kelton and I have a few posts on here already that have gotten a little attention but I needed to start a thread about Renko Charts and make sure everyone is informed on the power of Renko Trading.
First of what is a Renko Chart?
A: A type of chart, developed by the Japanese, that is only concerned with price movement; time and volume are not included. It is thought to be named for the Japanese word for bricks, "renga". A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down. This type of chart is very effective for traders to identify key support/resistance levels. Transaction signals are generated when the direction of the trend changes and the bricks alternate colors.
What is the benefit of using Renko over typical candle sticks?
A: Some of the advantages to Renko vs Typical Candle Sticks is that there is no wicks on a Renko Chart. But the main benefit is it filters out noise.You can see clearly the support and resistance levels and what price is actually doing inside a candle stick.
It's important to note that prices may exceed the top (or bottom) of the current brick. Again, new bricks are only added when prices completely "fill" the brick. For example, for a 5-point chart, if prices rise from 98 to 102, the hollow brick that goes from 95 to 100 is added to the chart BUT the hollow brick that goes from 100 to 105 is NOT DRAWN. The Renko chart will give the impression that prices stopped at 100.
It's also important to remember that Renko charts may not change for several time periods. Prices have to rise or fall "significantly" in order for bricks to be added.
Why I use Renko vs Typical Candle Sticks-
I am a technical trader just like 90% of traders. So why are all the traders not using a chart that is all based
on price? Price is what we follow and try to interpret, so we should use a chart that allows us to do so.
Also since you can set your Renko Chart up to what ever pip size is wanted you can either scalp or swing trade and your losses will be less because of the nature of Renko charts. Odds are you will close your trade before you get stopped out because you had a signal to close well before price was able to hit your stop.
Much more simple than this
Thanks for reading everyone! Let me know your thoughts or questions!