Renko Indicator Forex Strategy
We know that the Japanese candlestick chart has gained a great deal of popularity among currency traders but other types of interesting trading charts exist as well and one of them is the Renko chart.
The main idea behind the Renko chart is to eliminate market noise that is usually present in candlestick and bar charts.
By deploying the Renko indicator Forex strategy, we are conceptualizing this theory.
The strategy eliminates the time component and only focuses on price, thereby isolating the trend.
MetaTrader 4 Indicators: RenkoColorBars1.ex4 (Inputs Variable Modified; Method=24, filter=20, Steady=true), TheTurtleTradingChannel.ex4 (Inputs Variable Modified; TradePeriod=24), MACD.ex4 (Parameters Modified; Fast EMA=17, Slow EMA=31, MACD SMA=14)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day, 1-Week, 1-Month
Recommended Trading Sessions: Any
Currency Pairs: Any pair
Buy Trade Example: USD/CAD (US Dollar / Canadian Dollar), H1 Chart
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets put on display:
- If the silver bars of the RenkoColorBars1 custom indicator pop up within the chart window as seen on Fig. 1.0, the overall market sentiment is said to be bullish i.e. a trigger to buy the designated currency pair.
- If the dodger blue line of the TheTurtleTradingChannel custom indicator aligns somewhat below the Renko bars as shown on Fig. 1.0, price is said to be pressured higher, therefore, it is a signal to go long on the selected forex pair.
- If the silver histograms of the MACD Metatrader 4 indicator align above the 0.00 horizontal level as indicated on Fig. 1.0, bulls are said to be driving sentiments, as such a buy alert will suffice.
Stop Loss for Buy Entry: Place stop loss 3-5 pips below short-term support.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
- If the RenkoColorBars1 indicator displays a firebrick bar while a bullish trend is ongoing (see Fig. 1.0), bulls power is said to be weaning, therefore an exit or take profit stance is duly advised.
- If the TheTurtleTradingChannel indicator display a red line above the Renko bars during the course of a bullish trend, it is a signal to exit or take profit forthwith.
- If the silver histogram of the MACD indicator readjust to form below the zero reference level while a bullish trend is running, it is a trigger to exit or take profit straightaway.
Sell Entry Rules
Enter a sell order if the following holds true:
- If the red bars of the RenkoColorBars1 custom indicator pop up within the chart window as depicted on Fig. 1.1, the general market sentiment is said to be bearish, thus pointing to a likely short sell.
- If the red line of the TheTurtleTradingChannel custom indicator aligns fairly above the Renko bars as exemplified on Fig. 1.1, price is said to be dragged lower, therefore, it is a signal to go short on the currency pair of interest.
- If the silver histograms of the MACD indicator align below the 0.00 reference level as illustrated on Fig. 1.1, bears are said to be driving price lower, as such a sell alert will do.
Stop Loss for Sell Entry: Place stop loss 3-5 pips above short-term resistance.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
- If the RenkoColorBars1 indicator displays a silver bar during the course of a bearish trend (refer to Fig. 1.1), bears power is said to be halting, therefore an exit or take profit stance is duly recommended.
- If the TheTurtleTradingChannel indicator displaysa dodger blue line below the Renko bars during the course of a bearish trend, it is a signal to exit or take profit without delay.
- If the silver histogram of the MACD indicator readjust to form above the zero horizontal level while a bearish trend is ongoing, it is a trigger to exit or take profit at once.
Sell Trade Example: USD/CAD (US Dollar / Canadian Dollar), H1 Chart
About The Forex Technical Indicators Used
The RenkoColorBars1 indicator was designed to disregard time and volume, while considering only price changes.
The TheTurtleTradingChannel is a technical study that was designed by Dennis Gartman and Bill Eckhart.
The indicator relies on the breakouts of historic highs and lows and is trend-following in nature.
The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.
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