A frequently asked question about renko charts is whether you need to have additional indicators to trade on the chart. And if so, what are those indicators that are best suited for trading renko charts?
As you may know, renko charts are strictly based on price. Time, which is plotted on the x-axis, is irrelevant when dealing with this type of unconventional chart. Based on the number of pips price movements, which you can determine yourself, the renko bricks plot the price bricks accordingly. You may know that probably the best indicator is the price itself. Therefore, when determining price action and the patterns that are formed, traders don’t really need to have any more indicators to use.
Depending on their level of understanding of financial markets, such as identifying trends, price highs/lows, retracements, etc., traders have a higher chance of capturing prices at a good level to enter the trend. . Even without using indicators, renko charts can help you scale the markets, whether you are in it by 10 pips or 100 pips, renko charts make it entirely possible depending on the type of technical trading strategy you use. It is completely up to the trader and it depends on how you want to do your renko analysis of the charts and also determine the brick size.
Money management or risk management can also be used when trading renko charts and especially without indicators. Due to the very nature of renko box reversals, it can be helpful when traders can position themselves on a trade based on understanding price and other technical patterns are easier to spot on this type of chart.
For example, we know that a renko box reversal occurs when prices move twice the size of the box in the opposite direction. Therefore, the risk of a reversal is always twice the size of the box. For example, 20 pips for a renko box of 10 pips and so on. With this information, traders can prepare their positions in advance and thus be able to set a minimum take profit of 3 times the renko reversal, which in our example would be 60 pips. This effectively puts the risk at 20 pips while the reward at 60 pips, making it a 1:3 risk reward setup. Conservative traders can also make use of a 1:2 risk reward, such as 20 pip risk and 40 pip reward.
This same principle can be applied to renko chart analysis, regardless of whether you use indicators or not. Traders can build a money management strategy that allows them to make consistent profits on a regular basis. We mentioned earlier which is the best technical indicator to use with this type of chart. We suggest using moving averages and an oscillator, or using Bollinger bands and an oscillator.
Many times, Forex forums tend to get invaded by renko traders using complicated indicators. It doesn’t help much and it doesn’t give you an advantage in the markets.
In short, as described in this article, traders do not really need to make use of additional indicators to trade renko charts profitably. However, with that being said, there are some technical indicators that work well with renko charts.
