Renko charts, as written in our previous article is purely based on price action and is independent of time. Due to the nature of renko bricks, it is therefore easier to use various charting analysis such as trend lines, chart patterns, support & resistance. Unfortunately, most trading strategies based on Renko tend to focus on indicators such as moving averages, oscillators et all.
In this article, we give a brief outline into the basics of trading with Support/Resistance levels.
Short Term Support & Resistance
Perhaps the most easiest of all, traders can identify support and resistance levels with renko charts with much more ease than with using any other chart types.
The chart below is that of the NZDUSD, 10 pip renko move. The horizontal line plotted shows clear resistance. Further more, we also notice a double top pattern after broke the resistance of 0.86826. After subsequent attempts price finally managed to break out of this resistance level.
Chartists would know that the most important support/resistance levels are when past support turns resistance and vice versa. In this case, we notice how price went back to test this past resistance, now turned support. While it might have brought some doubts in real time trading, traders could have picked up an entry from the double bottom formed after price rallied from testing support.
The price targets for such an entry would be the most recent peaks.
Historical Support & Resistance
In this approach, the net is spread much wider and perhaps the waiting time for an entry could be just as prolonged as well. As the name suggests, the historical support and resistance are drawn over a longer renko bars. The trick is in laying patient until there is a confirmed break of either the support or resistance levels followed by a successful retest.
The chart below shows the historical highs and lows plotted on the NZDUSD renko charts.
After quite some attempts to break the high, we notice a strong consolidation that took place. After successful testing of the historical high, price rallied only to pull back, which would have acted as a confirmation to buy on the high of the triple top that was formed.
Renko Chart Patterns
By combining the concept of support and resistance, traders can look for various chart patterns such as double or triple tops and bottoms, head and shoulders, ascending and descending triangles and so on.
The chart below shows the various such chart patterns that have formed within the historical support/resistance levels as well as in the short term, providing ample trading opportunities.
Renko Charts Trading – Conclusion
From the above three types of trading approaches, we can see how simple it can be to trade price action based support and resistance trading strategies. Due to the nature of the renko charts, noise is eliminated from the equation thus making it easier to identify support and resistance levels and chart patterns. The only catch with renko charts is the fact that because they are not time dependent, patience is definitely a requirement when using renko charts.