Some vital aspects you won’t love to miss about Renko charts
Renko charts are considered kinds of trading charts that do the job of filtering out little movements in price, and this helps traders in concentrating on the bigger trends. In these charts, the cost should move a particular amount for forming a Renko brick. If the price rises, the bricks would appear green or white. Contrarily, if the price falls, then the bricks will be red or black. This makes the process easier to find the present route in which the cost moves.
If you use these charts correctly, then they would help you in lessening confusion that commonly arises on price direction. Again, you can also incorporate them into some trend trading policies.
An overview of Renko strategy
With time, Renko charting is gaining huge popularity among traders as they are using these charts in their trading strategy. To carry out the Renko strategy, you need to do the following:
- The patterns – Similar to patterns that are formed on a candlestick chart, like the triangles, head and shoulders, and rounded bottoms or tops, you will find some patterns on a Renko chart too. These patterns turn it easier for people to notice these charts. You can also detect these chart patterns when you use a chart pattern scanner.
- Resistance and support – A Renko chart highlights resistance and support levels that aren’t visible on a bar chart or a candlestick bar. When these charts are used continuously then they can turn higher or lower near a specific price area and it shows strong support or resistance. Traders can utilize these areas for getting potential trades, buying near support, or taking little trades near resistance. At times, traders also look for breakouts on these charts for getting the initiation of a novice trend.
- Using this charts in the form of a sprawling stop-loss – When trades hunt for capitalizing on trends, then they use Renko charts. When the trends do run for a long period, then it results in huge profits. However, it is tough to recognize the price that would move and that would finish in reversals.
Benefits of utilizing this charts
Renko charts demonstrate a time axis though the time intervals tend to be irregular here. It may take several months for a brick to come up but other bricks can get formed within some hours only. And so, in this context, these charts are different from candlestick as here, new candles get formed at specific time intervals.
The increasing or decreasing of the box size will leave an effect on the smoothness and consistency of a chart. When you lower the box size, then it will create more swings. Nonetheless, it will also show probable price reversals fast. The big size of the box will lessen the number of noise and swings but it will be slower for showing a reversal in price. Renko charting is effective to detect support and resistance levels as there is lesser noise. The formation of trading signals happens with the change in the trend direction and along with it, the bricks also change their colors.