Can you make money in trading with the Renko Charts? If Renko charts are really that good,
why do most professional traders don't use them? To answer that question, I want you
to look at these two trading charts, both charts are of the same stock, but one of them
is a Renko chart, and the other one is a normal candlestick chart. Some people say that their
trading guru, who has more than 40 years of experience in trading, uses and makes money
with the Renko Charts. But if you look at the charts of some professional traders you
know, you will most likely not find a Renko chart on their screens. They will probably
stick with the normal candlestick or a bar chart, that's because even though Renko charts
look amazing on the past data, they can easily make you lose money in the live markets. Now
I'm not saying they are bad, in fact, for some traders, they can be a jackpot. In this
video, I'm going to show you what Renko Charts really are in the live markets, and the good
way to use them. If you are new to the Trading Rush Channel, don't forget to Subscribe and
ring that notification bell, because we test many different trading strategies 100 times
to find their win rates, so you won't use a trading strategy that doesn't work at all.
What you are seeing on your screen are two live trading charts of a stock. On the right
side, it's the normal candlestick chart, but on the left side, it's the Renko Chart, and
as you can already tell, Renko Charts look very clean, and much easier to read than the
candlestick chart. Now, the right side candlestick chart might be difficult to read because it
is zoomed out too far, but there is a reason for that. You see, the reason Renko charts
look very easy to read, is because they lack some of the price data. The renko bars are
not exactly dependent on the time. By that I mean, Renko Bars don't have an expiry. A
renko bar is built using the price movement, rather than both price and the timeframe.
A new renko bar is only formed, when price moves a specific amount, and if price doesn't
move, a new renko bar won't be formed, and the current renko bar won't be closed.
Because of this, renko charts are very popular among beginner traders, as they can be used
to identify the trend, and filter the range and noisy markets. In most cases, renko bar
size is automatically calculated and set by the charting platform using the ATR values.
But with the right renko settings, if the price gets noisy, no new renko bar will appear.
But if you are a beginner trader, and have never seen renko charts before, Renko charts
can be very misleading. For example, If you look at past data like this, and think that
you could have made a lot of money with the Renko charts, by entering here and exiting
when the bars changed their color, you would have made less money than what you think.
You see, renko bars are not always formed brick by brick, in other words, one after
another. In many cases, multiple renko bars can appear at the same time. That's because,
a green renko bar only appears, if the price makes a move up, and the normal candle of
that timeframe, actually closes after making a move above a specific price.
For example, if the renko bar size was 5 dollars, a new green bar will only appear if the price
moves more than 5 dollars in the upward direction. But here's a twist, even though renko bars
have no expiration and stay at one place for a long time if the price doesn't move anywhere,
renko bars are still dependent on the timeframe you have selected. Like I said before, in
simple words, renko bars depend on the closing price of the normal candles. Let's say you
have selected the 2 min time frame, so every normal candle is closing after every 2 mins.
Because of this, if the renko bar size is 5 dollars, a new green bar can disappear,
if the price makes a move up, but closes with less than 5 dollars move. The point is, even
if the price movement looks really clean on the renko charts on the past data, you won't
always catch the entire move in the liive markets. Here's a real example, where renko
bars formed multiple same color candles in a row.
Now, one might think that they could have made a lot of money by entering when the bar
changed its color, and exiting when it changed the color again. But if you compare it side
by side with the normal candlestick, you can see that, instead of entering at the closing
price of the first renko bar, you would have entered right here, which is a completely
different price point than what we thought before. Similar thing with the exit signal.
The exit is not at the closing price of this Renko bar, but at a different price point.
Still, you can make a big profit if the price makes a big move in your favor. If that's
so, why won't you see professional traders use the renko charts while trading? Well,
the answer is pretty simple, with a good trading strategy on the candlestick chart, you can
enter at a much better price than where you would enter with Renko bars. And if you want
to catch a big profit, simply use a moving average and trail your stop loss with it.
It will give similar results like the Renko bars, maybe even better. Furthermore, Renko
charts don't show high and low points of a price movement. And they don't tell you
if the price is in a range for a long time or not. This information for an experienced
trader can be very useful to trade breakouts. Also, normal candles give a lot of information
about the number of buyers and sellers trading in the market with their different candle sizes.
If the Renko chart for taking entries is not as good as the candlestick chart, what good
is it then? Renko chart is not exactly bad, it's just that everything that Renko charts offers
can be achieved on the normal candlestick chart. But if you are a beginner trader, you
can use the Renko charts to read the market structure. And since Renko charts are easier
to read, you can use them to find strong price areas where price has potential to react from.
As you can see, potential support and resistance areas are easier to spot on the Renko chart. And
remember, support and resistance is an area, and not a single line on a chart. Price won't
react exactly from the support and resistance you draw, it can do that from little bit above
or below.
So here are the important points you should note.
Number 1. Renko charts filter noise that beginner traders can take advantage of to read the
price structure easily. Number 2. Renko bars can take forever to form
if the price doesn't move up or down. But remember, Renko bars are dependent on the
timeframe you have chosen. Since Renko bars are based on the closing price of the timeframe,
multiple candles can form or disappear. And sometimes, one can lose a lot of money if
the price suddenly makes a big move in the opposite direction before the new Renko bars
are completely formed. Number 3. Renko charts have a lot of limitations. Many
don't use Renko charts because candlestick charts provide more information. If you want
to catch the big move, just trail your stop loss using a moving average. And use the
Renko charts to find the support and resistance areas.
So that's all. Like the video if you liked it. Don't forget to subscribe to the Trading
Rush channel and ring the notification bell, because we test many trading strategies 100 times
to find their win rates, so you won't use a strategy that doesn't work in the long run.
Thanks for watching!