The no loss Renko trading strategy is a simple yet powerful price action approach to trading. This strategy uses Renko charts to identify trend reversals and continuation patterns. By combining Renko charts with basic price action principles, traders can develop an edge in the markets.
In this comprehensive guide, we will cover everything you need to know about the no loss Renko trading strategy.
An Introduction to Renko Charts
Renko charts are different from conventional candlestick charts. While candlestick charts plot price action based on time intervals, Renko charts plot price action based on movement.
Specifically, Renko charts contain bricks that represent fixed amounts of price movement. For example, a 20 pip Renko chart will contain bricks that each represent 20 pips of price movement.
As soon as price moves 20 pips, a new brick is formed on the chart. It does not matter how long it takes for this 20 pip move to occur. The only thing that matters is the price movement.
This gives Renko charts unique price action analysis capabilities compared to regular candlestick charts.
Key Benefits of Renko Charts
Here are some of the main benefits of using Renko charts:
- Removes noise – By filtering out smaller price movements, Renko charts help traders focus on the broader trend.
- Identifies support and resistance levels – Significant support and resistance levels become clearly visible as areas where bricks consistently reverse in direction.
- Easy to trade – The simplicity of Renko bricks makes it easy to identify chart patterns and trading opportunities.
- Trend identification – Extended brick formations in one direction indicate the presence of a strong trend.
Why Use the No Loss Renko Trading Strategy?
The no loss Renko trading strategy combines the analysis capabilities of Renko charts with solid risk management. Here are some key benefits of this strategy:
Capture Extended Trends
By using appropriately sized Renko bricks, traders can ride out extended trends for enhanced profits. Larger bricks help filter out market noise so traders can remain in quality trades for longer.
Effective Risk Management
The no loss aspect of this strategy refers to the use of a stop loss on every trade. This ensures trades are managed according to a risk/reward ratio. No losses are left uncapped.
The price action rules for trades are straightforward. No complex indicators are required. This makes it easy to implement with consistency.
Works on Any Market
The underlying principles work universally across all liquid markets including forex, stocks, commodities, and indices.
How to Trade the No Loss Renko Strategy
Now let’s take a look at how to actually trade using this strategy:
Select the Right Brick Size
Don’t use the default Renko brick size. Optimize this parameter for the market you are trading. Generally, larger brick sizes produce the best results.
Brick sizes in the range of 20-50 pips tend to work well for most forex pairs. Avoid going above 100 pips.
Identify the Trend
Determine if price is trending higher or lower. Focus on larger time frames (one hour and above) to identify the dominant trend.
Extended brick formations in one direction confirm an uptrend or downtrend. Don’t take countertrend trades.
Wait for Reversal Patterns
Make sure the pattern aligns against the dominant brick direction i.e. a bullish reversal pattern forms within a downtrend.
Place Stop Loss Orders
Place an initial stop loss for every trade based on the size of the reversal pattern. For example, place stops beyond the high or low of a pin bar.
Adjust the stop to just above key support and resistance levels as the trade moves in your favor. Move stops to breakeven at the earliest.
Take Partial Profits
Scale out of profitable trades by closing partial positions at key technical levels. For example, close one-third of the position at a 1:1 reward-to-risk ratio target.
Let the remaining position run by trailing the stop loss. Aim to book 50% at a 2:1 target and the rest at a 3:1 target or higher.
Now let’s look at some real chart examples to see how the no loss Renko trading strategy can be applied:
Uptrend Reversal Trade
This EUR/USD chart shows an uptrend reversal trade setup using Renko bricks. With the dominant trend up, we wait for a bearish pin bar reversal pattern to form.
A stop loss is placed above the high of the pin bar. Take partial profits at 1:1 risk/reward initially and move the stop to breakeven. Further targets are placed at 2:1 and 3:1.
Downtrend Continuation Trade
Here we can see a short trade on the GBP/USD based on a bearish Renko brick formation. The overall downtrend is confirmed by a series of red bricks.
We enter on the close of the first bearish brick after a brief retracement. Stop loss placed above the high of that brick. Take profits are staggered above support levels.
FAQs about the No Loss Renko Trading Strategy
Here are answers to some frequently asked questions about this strategy:
What indicators can be used with this strategy?
The beauty of this strategy is that no indicators are actually required. Price action works best. But some traders add Moving Averages or the Relative Strength Index (RSI) for additional trade confirmation.
Does it work better on some markets than others?
It works well on all liquid markets. Ideal for forex and indices. Not recommended for choppy, low liquidity markets.
Can this work on small time frames?
It is best optimized for larger time frames of one hour and above. The principles can work on smaller time frames but expect more false signals.
Is trading directly from Renko charts advisable?
Yes, Renko chart patterns provide all the necessary information to apply this strategy. Avoid cluttering up the chart with too many indicators.
How do you determine profit targets and stop loss levels?
Initial stop based on risk management rules like 1-2% risk per trade. Targets at technical levels like support, resistance and moving averages. Move stop to breakeven when trade hits 1:1.
The Advantages of the No Loss Renko Trading Strategy
Here are the main advantages of using this simple yet powerful price action system:
- Captures extended trends safely – Renko charts allow trades to stay open longer by eliminating noise.
- No subjectivity – The strategy sticks to predefined price action rules. No second guessing of signals.
- Suitable for beginners – The strategy can be learned quickly and implemented consistently.
- Stress-free trading – The high probability setups and proper risk management ensures a smooth trading experience.
- Maximizes gains – Scaling out at pre-planned technical targets allows large gains to be captured.
The no loss Renko trading strategy offers a stress-free approach to profit consistently from trend trading opportunities. By combining the power of Renko charts with solid risk management, it delivers high probability setups.
Traders can implement this strategy across all major markets and timeframes. Backtest to optimize parameters like Renko brick size for your market. Stick to the rules, focus on quality setups, practice proper risk management, and enjoy the trading journey ahead!
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