Are Renko Charts a Better Way to Trade Forex?
Renko charts hold their own forte when it comes to traders using these custom chart types. Although the more popular candlestick or bar charts are still widely preferred, traders who trade the markets with Renko bricks tend to be more comfortable trading this chart type than switching to other forms. A quick look at some of the popular trading forums and one can see the increasing number of traders coming up with new Renko trading strategies.
What exactly is a Renko chart you might be wondering?
Well, for starters it is not a holy grail chart that will show you things that others don’t see. Renko charts are merely a graphical way of displaying price on the charts, in the form of bricks.
If you haven’t come across a Renko chart before, the first time you look at these charts can be visually captivating. If you have been around in the markets for a while, you might actually find some similarity between Renko and Heikin Ashi charts, at least as far as trends are concerned. But that’s where the difference ends. Renko bricks are unique because the charts are built using price, unlike other charts including Heikin Ashi where time is a factor. This unique feature makes the Renko bricks purely showing price and thus in a way trends as well. What captivates most traders about Renko charts is the fact that due to the lack of noise in the price bricks, it is a lot easier to trade. We all know the popular usage of the trend being your friend.
Renko boxes are widely used, not just in the Forex markets but also in stocks and futures as well. For a technical analyst who prefers to trade with price action, there is nothing better than this. From chart patterns to support and resistance levels, you can quite see everything that price is doing.
It is perhaps due to this feature that Renko charts are often used by traders, who rather unfortunately expect to see their trading turn around. But that is not always the case. If you are trading without understanding the concepts of the market dynamics, then no chart, existing or future inventions will be able to help you make profits with trading.
But why use a Renko chart type where there are tons of other regular conventional and un-conventional charts to use from?
As mentioned, it is purely a question of preference. For the astute technical analysis, Renko charts can offer a lot more information compared to a Heikin Ashi or a candlestick chart. This chart type can also be beneficial if you are not worried about time but focused on what price is doing. And yes, due to the nature of these charts, there is some key market information that can be easily seen, but could be missed when using one of the many conventional chart types.
Reasons why you could use Renko charts
Here are some of the main benefits of using Renko charts.
Price indecision: In traditional chart types, price indecision usually refers to prices ranging back and forth. While this is also evident on Renko charts where you can see these ranging price patterns with consecutive bricks being plotted up and down and prices heading nowhere, there is an edge however.
The advantage is that these consolidation or indecision zones are easier to spot. And if you are good at your technical analysis, you can look at past price action and figure out why the market is behaving the way it is.
Pull backs in a trend: There are tons of articles that talk about how to trade pull backs but the truth is that in real-time it can be hard to trade unless you know and are confident in your trading approach. With Renko, the pull backs in the trend are a lot easier to spot and don’t require much of subjectivity.
More trading opportunities: Whether you want to scalp the markets or whether you are in for the longer term, Renko charts can show you different ways to trade. From taking profits for every 10 ticks to riding the trends, or even counter trend trading, the charts make it all the more easier. It all depends on how big your Renko brick size is.
In conclusion, if you are looking for an alternative way to trade the markets, not just in hopes of finding the next holy grail, then renko charts might be worth your time, as long as you have an open-mind and willing to explore the possibilities.