Before you start investing and become a Forex trader, it is essential to know ways on how to make trading easier, such as being familiar with charts. There are various charts and indicators that you can use.
This article will focus on Renko indicators. Know what and how you can use Renko charts to trade in Forex trading successfully.
The Renko Chart in Forex Trading
Renko bricks use green for growth and red for price decline in the Forex market. The brick will only change once there is a vast price movement from the previous data and each brick is at a 45-degree angle. Using this chart makes it easier for Forex traders to read and make quick decisions in trading.
The Renko chart, also called brick charts by market traders, was developed by the Japanese several years ago and was introduced to the public by Steve Nison. The name came from the word “renga,” which means bricks, as the chart has two colored bricks with the same length and width.
Renko can be an alternative to Japanese candlesticks as they represent price changes or movement, but Renko doesn’t use time and volume, unlike candlesticks.
Renko Chart and Other Indicators or Chart in Forex
In Renko charts, it is possible to know where the market is moving by removing the complicated parts of the candlestick chart. Below are possible combinations with indicators.
MACD in Renko and Candlestick Charts
Besides the Renko chart is more straightforward to use than a candlestick chart, you can’t also analyze trading volumes and differences in the interface. There is also a difference when it comes to how indicators work for each chart.
The MACD or Moving Average Convergence Divergence’s primary purpose is to follow and confirm the trend between two moving averages. In using MACD in the candlestick, there can be so many lines crossing each other, while in Renko, the signals are smaller, but the quality is higher. However, MACD in Renko is slower and lagging than the other.
Renko Combined With Heikin Ashi Charts
It is also developed in Japan and has a very similar use and look to Renko and helps determine the up and down on the trends. However, since Renko uses brick and has fixed value, Heikin Ashi focuses more on exploring the open, close, high, and low amount before or during the period. Combining these two charts will give you excellent results by using both of their advantages and disadvantages.
RSI Indicator or Relative Strength Indicator
Another indicator you can use is RSI, the power index movement from 0 to 100. RSI also indicates the area where overbought and oversold in the market will happen. The price movement in Renko charts will not help overbought or oversold situations, but instead, Renko can predict it and prevent massive loss from the traders.
The Fibonacci Levels
This indicator performs well with the Renko chart. Fibonacci is a tool that traders can use to see the precise direction of the market. It is also a tool primarily used to know and monitor support and resistance levels that can be used to confirm indicators for trading on level breakouts.
ATR or Average True Range
This indicator is used to calculate the Renko chart along with the percentage of the value and static box size, similar to Bollinger bands. ATR is a method to show the irregularity of an asset in a period of time. ATR is calculated using averages among local extrema, high and closing price, and low and closing costs. This indicator helps you know when you can earn a good profit and find ways to reverse a possible loss.
Renko Charts Importance and Effect in Forex Trading
Now that you know what and how to use Renko indicators, you may be familiar with the MetaTrader toolkit and ask if the Renko chart is available in MT4. The answer is no. However, you can install additional indicators for you to use the Renko chart. Here are the indicators you can download from the web:
- KT Renko Live Chart
- KT Renko Patterns MT4
- TSV Renko FX
- Renko Shade
- AG Renko
You might also want to know the advantages and disadvantages of using Renko charts in Forex trading. We summarized some of them that will help you.
Pros:
- Cleaner presentation of price movement
- Determining the market direction and reading signals is easier
- The accurate data will give you profit instead of loss
- Works well on support and resistance level in trading
Cons:
- Can lead to problems in the analysis due to the removal of other vital data
- Renko chart is always lagging and a cause of delay to every trader
- You can only measure the price movement but not the volume in different periods
Will Using Renko Chart Make You Successful in Forex Trading?
Trading is always accompanied by risks. These risks, however, can be managed, and any investor can achieve success with the proper utilization of methods available to them.
Using Renko charts is more advisable than other charts or indicators, especially if you are a beginner and struggle to use candlestick or other techniques. Remember to fully understand the Renko indicator first so you can use them effectively to gain and not lose profits.