Renko breakout strategy forex

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In other words, the OBV offers information regarding the strength of price movements. So, the OBV increases or decreases during each day in correlation on whether the price closes higher or lower compared to the close during the previous day. The main assumption is that On Balance Volume movements precede price changes.

As the volume is the main fuel behind the market, OBV is designed to anticipate when major moves in the markets would occur. The numerical value of OBV is statistically irrelevant. A new green renko bar forms above the SMA10 2. We only take trades in the direction of the SMA. When the Renko bars are traded above SMA10, we look for long entries 3. We filter the signal with the On Balance Volume.

We look for a new high in the OBV, which indicates that buyers are stronger than sellers, and the price is likely to increase. When OBV increases in tandem with the price, the upward trend is confirmed. Stop loss will be placed 2 Renko bars below the entry point. We can exit the position manually if the price falls below the simple moving average.

Minimum take profit should be Renko bars into the future, to cover the spread and commissions. When the price reach this target, we can move our stop loss to break even and let the trade ride, or we can use a trailing stop to capture a larger part of the move. Chart no. In this manner, some of the price action is not included in the Renko blocks.

Therefore, the ticks outside the Renko blocks are displayed with these candlewicks. So, I wanted to take a moment to discuss how to do so. First, you should download the MQL4 file of the Renko chart indicator. This will prompt a pop up folder on your screen.

You would simply drop the file there. Then you would restart the MT4 terminal. When you do this, you should see your Renko file there. After you do this, another window will pop up on the chart. This is the settings window of the Renko indicator you have just dropped on the chart. You may be thinking that nothing has changed, but on the top right corner of your chart you will see a text which gives you the Renko version you are using and a smiley face.

Also, you will see in the upper left corner a text which tells you that you need to open a MT4 chart offline to make the tool work. This is what we will be doing now. A window will pop up, which contains different offline chart options. You should scroll and find the time frames listed in the upper left corner on the MT4 terminal. You now have an open Renko chart on your Metatrader 4 platform. Click Here To Join Advantages of the Renko Chart in MT4 Any trader that has used Renko charting knows that it is very effective for gauging the price action of the instrument that you are watching.

Since the chart basically smoothes the price action, we almost always have a present trend in front of us. On the image above you see the different price swings on the Renko chart. Notice that there are no consolidations. There are smaller and bigger trends, but there are no overlapping ranges. Ideal for Support and Resistance Trading The Renko chart is very effective for identifying support and resistance levels correctly.

Since the price action of the Renko chart contains the price action of a pre-specified pip movement, support and resistance levels can be very clearly displayed. Below you will see an image which shows four levels on the chart. Notice that after the price interacts with each of them, we see the creation of a new directional move. The red circles on the chart show the moments when the Renko bars break an important level.

As you see, each of these breakouts leads to the creation of a new trend. Opposite to this, the support, which is illustrated at the bottom of the chart is the beginning of a new upwards movement. After the price bounces twice from it, we see the creation of a new bullish trend.

Easy-to-Find Chart Patterns As with support and resistance identification, chart patterns are also much easier to recognize on a Renko chart. The blue lines illustrate a Rising Wedge pattern. As you can see, the price drops after breaking the lower wedge line. Then comes a bullish channel, which is illustrated with the red lines. Notice that the price action creates swings in the frames of the channel. After the bearish breakout, the price decreases. The next pattern is shown in green, and it is an Inverted Head and Shoulders pattern.

After the creation of the second shoulder, the price increases again. The magenta figure is a Double Top pattern. The decrease which comes at the end proves the validity of the figure. Breakout Confirmation on Renko Charts The basic function of the Renko chart is to provide a clearer level of price action analysis.

One of the most popular methods of using the Renko chart is to trade breakouts. Though this is a valid method, I would suggest that you confirm breakout signals on the Renko chart. Try to confirm a breakout with a second candle. If a Renko candle goes beyond a trend line make sure you see another candle, which extends beyond the breaking candle.

The Renko chart structure is very precise in building trends. As such, trend lines on a Renko chart are relatively accurate. So, a valid trendline breakout confirmed by a second Renko block should give us a reasonable amount of confidence for predicting the beginning of the trend reversal. Typically, you would wait to open a position until after a Renko bar breaks beyond a trend line and a second Renko bar extends beyond the breaking bar.

Once this occurs, you should put a stop loss beyond the most recent or high or low swing point created prior the breakout. You can use price action based clues to hold onto the position until such time as the weight of evidence shifts in favor of the opposite direction. The image illustrates a strong bullish trend which eventually gets broken to the downside. Notice that the trend line is very well positioned — one of the positives of Renko based trading systems.

A fake breakout appears first, which is referenced by the red arrow. Shortly after that, on the subsequent test, you will see that a Renko block closes below the trend. A Renko candle goes beyond the trend line, and the next candle extends even lower. You should place your stop loss order right above the highest swing point before the breakout.