Renko Charts Trading Strategy

Renko Charts Trading Strategy is one of the many different chart types that are available to plot the price action. Other chart types include line chart, OHLC bar chart, candlestick chart, point and figure to name a few.

The uniqueness of Renko charts however is the fact that it is purely price based and does not factor in time, as with the more commonly used chart types (Line, Bar, Candlestick patterns).

The Renko charts trading strategy gives traders a different perspective to price action and therefore even the methodology involved can differ when compared to the regular trading strategies using one of the more conventional chart types.

What is Renko Charts Trading Strategy?

Renko charts were developed in Japan and the term ‘Renko’ comes from the Japanese word ‘Renga’ or ‘Brick’. Renko charts are easy to identify based on the ‘bricks’ that are formed with each brick representing a fixed amount of pips or points for the instrument for which it is being used.

For example, a 20 pip Renko chart would mean that a new brick is formed only when price moves 20 pips above or below the previous price. Renko charts do not consider when (the time factor) price moves and therefore depicts price action in its purest form.

Trading Renko Charts with Ichimoku and Price Action

There are many trading strategies that can be developed using Renko charts both indicator based or price action based. One of the more common approaches to trading with Renko charts is the price trends that are visually easy to identify and therefore trend trading is one of the more common ways to trade with Renko charts.

The most commonly used indicator that comes to mind when using a trend following strategy is the Ichimoku indicator. Applying the Ichimoku to the Renko charts but only using the Ichimoku cloud and the lagging span can offer a fairly simple trend following strategy. The chart below shows a sell set up using the Ichimoku set up using Renko charts which uses a combination of both the Ichimoku trading rules and price action based support/resistance

Renko Chart Trading Strategy - Sell Signal

Renko Charts Trading Strategy – Sell set up using Ichimoku and Price Action Strategy

Renko Charts Trading Rules

Sell Signal Trading Rules

Price breaks below the Ichimoku cloud and retraces to establish resistance below the Cloud
Lagging span is below price indicating a bear market
A near term support level is identified and a short position is taken on break of this minor support level

The trade is exited after a double bottom pattern was identified
Stops are placed two or three Renko bricks above the entry price

The next chart below shows a buy set up using the Ichimoku and Price Action based method on the Renko charts.

Renko Chart Trading Strategy - Buy Signal Renko Charts Trading Strategy – Buy Signal using Ichimoku and Price Action

Buy Signal Trading Rules

Price breaks above the Ichimoku Cloud and then dips to establish support in the cloud

A few Renko bars later, the lagging span breaks above the price indicating a move to the upside
A minor resistance is identified and a break above this resistance results in going long
The trade is exited after a lower high is formed

Stops are placed two or three Renko bricks below the entry price

Renko Charts Trading Strategy – a Wonderful Timeless Strategy

Renko charts are ideal and offer a unique perspective on price. Because the charts are purely price based, traders are able to better gauge the price trends. However, the downside being that trading with Renko charts requires a lot of patience which makes for an important factor.

By applying a combination of both indicators and price action methods to Renko charts, traders can find some profitable trade set ups that would be otherwise missed by regular or conventional charts.