Are you one of those traders who tend to exit their trades a bit too quickly? Do you often end up looking at the markets from the sidelines with all your trades closed, while the markets continue to move in your favor?
You are most likely one of those traders who closed their trade for a 40 pip profit only to see the market go another 40 pips in the same direction. Times like these, we wish we had a crystal ball or something that could helps us to anticipate these moves.
There are a number of reasons why traders end up cutting their trades too early. There are a number of factors, from being fearful of the markets to not knowing where to protect their profits and where to keep the trade running.
If you are one of these traders then fret not. Chances are that you might not have heard about a custom chart type called Renko charts. Read on further to find out more.
What are Renko Charts?
A Renko chart is a typical price chart, similar to a candlestick, line or bar chart that one is familiar with. It is plotted on the price chart, but it is unique because of one main factor. Unlike a candlestick or a bar chart where a new candle or bar is opened after a period of time, a Renko chart is independent of time.
This feature makes Renko charts very unique in the way they show price and the way they plot price. With this uniqueness comes the fact that the Renko chart can show some market information that can otherwise missed when looking at traditional charts.
The first picture below shows a stock chart for AAPL with a Renko chart. You can see the uniqueness of the Renko charts which we have been talking all along.
In the above chart, the Red and black bricks are nothing but Renko charts.
Renko charts evolved in Japan and dates back to the same period as Candlestick charts. They are still in use today so do not draw to the conclusion that Renko charts are outdated.
In fact, Renko charts are versatile enough that it also allows you to draw indicators on the Renko bricks as shown in the picture illustrated above. All of these factors makes trading with Renko charts very unique.
Taking a quick look at the above chart you can see that Renko charts can be traded with just price action alone or even with indicators. It is basically up to you on choosing which of these two methods will help you to best capitalize on the markets.
Trends and Renko charts
If there is one thing that is clear from the above chart, it is the fact that Renko charts do a wonderful job when it comes to depicting trends. Therefore, when you are in a trending market you can expect to make a lot of money.
Most often, traders who cut their trades too early should know the trend and keep their trades open in order to fully capitalize on the trend.
This is of course quite difficult to comprehend when one makes of candlesticks or line charts or even bar charts. Noise is often a complaint one gets to hear when using these traditional chart types. However, with Renko, these noise and choppy factor is eradicated straight away.
Interested to learn more about Renko charts? Visit http://renkotraders.blogspot.com to learn about the basics of trading with Renko charts and also how you can see many examples on conducting technical analysis with Renko charts.
Renko charts are available on just about every trading platform that you can image and therefore is a great way to start changing your trading methods in order to make it more robust.