Forex trading has become a popular investment opportunity for people all over the world. With the advent of modern technology, it has become easier than ever to access the forex market and begin trading. Renko charts are one of the most popular ways to analyze and trade the forex market. In this article, we will explain what Renko charts are and how to use them to trade forex successfully.
What are Renko Charts?
Renko charts are a type of charting system that originated in Japan. They are unique in that they do not take into account the time factor when plotting price movements. Instead, Renko charts are constructed by plotting bricks or blocks in a way that represents price movements. When the price moves a certain number of pips, a new block is added to the chart. The size of the block is predetermined and can be adjusted according to the trader’s preference.
Renko charts are useful for traders who want to eliminate the noise that is present in traditional candlestick charts. Since Renko charts only plot price movements, they can help traders identify key support and resistance levels more easily. This makes it easier to identify trends and make trading decisions.
How to Trade Forex with Renko Charts
Step 1: Choose a Trading Platform
The first step to trading forex with Renko charts is to choose a trading platform that offers this type of charting system. Most popular trading platforms like MetaTrader 4 and 5 offer Renko charts as an option. Once you have selected your platform, you will need to create a Renko chart by selecting the Renko option from the chart menu.
Step 2: Set Block Size
The next step is to set the block size for the Renko chart. The block size is the number of pips that the price needs to move before a new block is added to the chart. The block size can be adjusted according to the trader’s preference. A larger block size will result in fewer blocks being added to the chart, while a smaller block size will result in more blocks.
Step 3: Identify Key Support and Resistance Levels
Once you have created your Renko chart, you will need to identify key support and resistance levels. Renko charts make it easy to identify these levels since they eliminate the noise that is present in traditional candlestick charts. Traders can use the support and resistance levels to identify trends and make trading decisions.
Step 4: Use Technical Indicators
Renko charts can be used in conjunction with technical indicators to help traders make better trading decisions. Popular indicators like Moving Averages and Relative Strength Index (RSI) can be used with Renko charts to identify trends and overbought or oversold conditions.
Step 5: Place Trades
Once you have identified key support and resistance levels and used technical indicators to identify trends, you can place trades. Traders can use a variety of trading strategies with Renko charts, including trend-following and breakout strategies. It is important to have a solid trading plan in place before placing trades to minimize risk and maximize profits.
Renko charts are a powerful tool for forex traders who want to eliminate noise and focus on price movements. By using Renko charts in conjunction with technical indicators and a solid trading plan, traders can make better trading decisions and increase their chances of success. As with any trading strategy, it is important to practice good risk management and have a disciplined approach to trading.