Forex investors are constantly seeking new and innovative ways to trade the markets and increase their profits. One such method that has gained popularity in recent years is the use of Renko bricks. Trading Forex with Renko charts are a type of charting tool that was developed in Japan in the late 18th century. The charts are based on price movements rather than time, which makes them ideal for traders looking to focus on price action.

In this article, we will explore the origins of Renko charts and their application in forex trading. We will also discuss how forex investors use Renko bricks to help achieve positive trading results.

Origins of Renko Charts

Renko charts were developed in Japan during the Edo period (1603-1868). The charts were originally used to track the price movements of rice, which was the primary commodity traded at the time. The word “renko” means “brick” or “block” in Japanese, which is fitting as the charts are made up of blocks or bricks.

Unlike traditional candlestick charts that are based on time, Renko charts are based on price movement. The blocks on the chart represent a fixed price movement, regardless of the time it takes to get there. For example, if a trader sets the block size to 10 pips, each block will represent a price movement of 10 pips.

Renko charts have several benefits over traditional candlestick charts. One of the most significant benefits is that they eliminate market noise.

Renko charts only display price movement that meets the set block size, which makes it easier for traders to identify trends and price action. Renko charts also make it easier to identify support and resistance levels, which are essential for traders to make informed trading decisions.

How Forex Investors Use Renko Bricks

Forex investors use Renko bricks to help achieve positive trading results in several ways. The most common application is to identify trends and price action. Renko charts make it easy to identify trends because they eliminate market noise.

The blocks on the chart are either bullish or bearish, making it easy for traders to identify the direction of the trend. When the blocks are predominantly bullish, it indicates a bullish trend, and when the blocks are predominantly bearish, it indicates a bearish trend.

Traders can also use Renko charts to identify support and resistance levels. Support and resistance levels are price levels where the market has historically shown support or resistance.

Traders can use these levels to enter or exit trades. Renko charts make it easier to identify support and resistance levels because they eliminate market noise. Traders can use the blocks on the chart to identify where the market has historically shown support or resistance.

Another way forex investors use Renko bricks is to identify price breakouts. Price breakouts occur when the price of a currency pair breaks through a support or resistance level.

Traders can use Renko charts to identify price breakouts because they eliminate market noise. Traders can use the blocks on the chart to identify where the market has historically shown support or resistance. When the price breaks through a support or resistance level, it indicates a price breakout.

Renko charts can also be used to identify reversal patterns. Reversal patterns occur when the trend of a currency pair changes direction. Traders can use Renko charts to identify reversal patterns because they eliminate market noise.

When the blocks on the chart change from predominantly bullish to predominantly bearish, it indicates a bearish reversal pattern. When the blocks on the chart change from predominantly bearish to predominantly bullish, it indicates a bullish reversal pattern.

Example Use Case of trading Forex with Renko

Let us consider an example of how forex investors use Renko bricks. Suppose a trader wants to trade the EUR/USD currency pair using Renko charts. The trader sets the block size to 10

pips, which means that each block on the chart represents a price movement of 10 pips. The trader then observes the chart to identify trends, support and resistance levels, price breakouts, and reversal patterns.

Suppose that the trader notices a bullish trend on the Renko chart. The blocks on the chart are predominantly bullish, indicating that the price of the EUR/USD currency pair is increasing. The trader then identifies a support level at 1.2000. The support level is a price level where the market has historically shown support. The trader decides to enter a long position at 1.2020, which is 20 pips above the support level.

The trader sets a stop loss at 1.1980, which is 40 pips below the support level. The stop loss is a price level where the trader exits the trade if the price of the currency pair moves against them. The trader also sets a take profit at 1.2100, which is 80 pips above the entry point. The take profit is a price level where the trader exits the trade if the price of the currency pair moves in their favor.

Suppose that the price of the EUR/USD currency pair breaks through the resistance level at 1.2080. The price breakout indicates that the bullish trend is likely to continue. The trader decides to move the stop loss to 1.2040, which is 40 pips below the entry point. The trader does this to protect their profits in case the price of the currency pair moves against them.

Suppose that the price of the EUR/USD currency pair reaches the take profit level at 1.2100. The trader exits the trade and makes a profit of 80 pips. The trader’s positive trading result was achieved by using Renko bricks to identify trends, support and resistance levels, price breakouts, and reversal patterns.

Conclusion

Renko charts are a valuable tool for forex investors looking to focus on price action. The charts eliminate market noise and make it easier to identify trends, support and resistance levels, price breakouts, and reversal patterns. Forex investors use Renko bricks to help achieve positive trading results by making informed trading decisions based on the information provided by the charts.

While Renko charts are a valuable tool, they should not be the only tool used by forex investors. Traders should use Renko charts in conjunction with other technical and fundamental analysis tools to make informed trading decisions. Traders should also practice risk management and use appropriate position sizing to manage their trading risks.

In conclusion, Renko charts are a valuable tool for forex investors looking to trade the markets using price action. By using Renko bricks, traders can identify trends, support and resistance levels, price breakouts, and reversal patterns, which can help them make informed trading decisions and achieve positive trading results.