There is little doubt in the mind of Renko Chart enthusiasts that
Renko Charts give them a decided advantage over the rest of the market
participants when trading Forex. Early entrance into the market at the
start of a trend, and an early exit when the trend starts to collapse
are just two advantages Renko Chart users have over Candlestick and Bar
chart traders. However, this does not mean that Renko Chart traders
never lose a trade. In fact, quite the contrary is true.
Having
used Renko Charts for close to three years now, I can attest that while
they have made my trading life simpler and have pointed me towards many
more winning trades than I found using traditional charting methods, I
still lose my fair share of Forex trades.
I've stated this many
times in the past, and will continue to repeat it for as long as
necessary: There IS NO SUCH THING as a "Holy Grail" trading method, in
Forex or in any other trading venue. No one wins every trade they take.
NO ONE!
All you can hope for is to find a method, or as in the
case of Renko Charts, a form of price presentation, that will give you
an edge over the rest of the traders in the market. Forex trading is a
zero sum game. That means for every dollar you win in a trade, some
other trader in the market lost a dollar. That trader could be a small
retail trader like the rest of us, or it could be Citibank. Who it was
that lost that trade doesn't matter. The point is, on every trade,
someone wins and someone loses.
The true benefit of Renko Charts is that they give you the chance to be the "someone" who wins the trade more often.
But
losing trades is a fact of life, and any trader who has the desire to
build their fortune through the Forex markets had better get used to the
idea that there will be winning days and there will be losing days when
trading Forex. A key to success is limiting your losses on the losing
days to a handful of pips, and letting the winning trades run as far as
possible on the winning days, allowing you to maximize your pip gains.
One
way to keep your losses at a minimum when trading Renko Charts is to
follow the "One Bad Candle and Out" rule. This rule simply means that
when you enter a trade, you decide you will exit that trade as soon as
the first opposite color candle forms and closes. If you are trading a
smaller Candle/Box size (anything under 8 pips) you will likely find
yourself getting in and out of trades more often, as price tends to move
back and forth within a 15 pip range on many occasions.
However,
if you use a larger Candle/Box size (9 pips or more) you'll find that
you end up in plenty of 40-100 pip trades that may take several hours to
develop, but you won't see an opposite color candle during that time,
and as price ultimately moves in your direction, the amount of profit
you can safely lock in with an adjustable stop-loss will grow with it.
Losses
trading Forex are a fact of life, and every single trader in the Forex
markets has to deal with them from time to time. Renko Chart traders
simply don't see as many of them as the Candlestick and Bar chart crowd
do, and because of the One Bad Candle and Out rule, Renko Chart traders
can limit their size of their loss to just a handful of pips which can
easily be earned back on the next good trade.