How to trade Renko Charts ? What are the best Renko Bar Trading Strategies / Techniques you can use to make money in Day Trading ?
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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.
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.
If the Renko chart for taking entries is not as good as the candlestick chart, what good is it then? Well...
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