There is nothing mystical about Renko charts
Renko Charts are nothing but pure price action, built brick by brick. Therefore, there is nothing 'special' or 'magical' about this cute looking chart type. I would advise traders considering using Renko charts to first brush up on their technical analysis such as chart patterns (Head & Shoulders, Cup and Handle, Double Top/Bottom and so on). Such patterns are much easier to see and understand on Renko charts than line charts or bar charts or even the good ol' Candlesticks.
Renko Chart Settings
There is considerable debate about the chart settings to use for Renko. There are just two methods to set up Renko's. One is a standard fixed pip (ex: 10Pips). In the fixed pip, a new brick is formed when price moves 10 pips higher. Likewise, a new bearish brick is formed when price moves 20 pips lower (cross past the previous 10 pips and move a further 10 pips down). The second way to configure Renko charts is by using the ATR setting (default is 14, but you can use anything). Critics of fixed Renko bricks say that ATR is better because it reflects volatility much better and therefore bricks are more recent, relative to the volatility. But there's a catch. Say if the 14 day ATR changed quite a bit... or just a few decimals?? That would mean the entire Renko is rebuilt (of course, thanks to the power of semi-conductors, we don't have to bother about this bit) and it could potentially throw your existing trend lines and chart patterns out of the window. But this is something that is far fetched. I do use a mix of both fixed and ATR based renko settings. Price action is price action, regardless of how you configure renko. The key is in catching a move as it happens.
Advantages & Disadvantages of Renko
Here's a simple experiment. Try using Renko for a week and then go back to using candlesticks or whichever your preferred chart type is. You'll notice that your stress (subconsciously) is a lot lesser when using Renko. The reason is because of the way the bricks are laid. Sure, there will be price wicks... for example, in a long position, price might move 19 bricks but a new Renko brick won't be printed until price closes below the 20th pip. This means that you will succumb to choppy price action... if you do not know how/where to place your stops or target levels.
With Renko, it is a lot easier to see how price reacts to key pivot points, trend lines and so on. Thus, automatically your eye focuses on the unfolding and past price action than anything else.
Renko Trading teaches you discipline
If you thought trading the markets (especially forex) was boring, wait till you get the hang of Renko charts. The good part is that Renko trading requires a lot of discipline and patience. It keeps you from overtrading your account, but it means trading gets even more boring. However you are no longer required to stare at the charts. The way I trade renko is by setting up my charts and placing an alert for the price i'm waiting for (along with appropriate comments, so I don't end up getting confused)for an instrument and don't bother about the chart anymore. This gives me time off from the charts.
Trading with Renko Charts - Resources
If you are interested in trading with Renko Charts, I recommend a Pro subscription to TradingView. It is well worth your money and costs you $9,95 a month. There is a more expensive option of $19,95/month but you don't really need that. The only restriction with the $9,95 pro subscription is that Renko's is limited to daily charts only.... But hey, Renko is not time based so it doesn't matter :)
Click here to purchase a Pro Subscription to TradingView.com
If you are using the MT4 trading platform, then click here to get a copy of the Renko Indicator. It costs only $35. Yes, I know there are many hacked/nulled versions of Renko indicator available but I still suggest you purchase this indicator as the developer plans to include a lot more features in due time.
