Renko Chart Pattern Breakout Trading Strategies

Renko chart pattern breakout strategies add another dimension to Renko chart trading on top of what we get from our ‘base’ method setups.

Typically, we determine if a Renko setup can be traded by how many bricks of room we have to price. If there aren’t 3+ bricks, we consider the setup filtered for the price and won’t trade it.

However, breakout patterns tend to lead to price continuation – and thus provide higher odds for trade entries that increase trading profits.

Renko Pattern Breakout Strategies

Besides leading to Renko trades that might not otherwise be taken, what other trading benefits could Renko chart pattern breakout strategies provide?

Think about this question in the context that a pattern breakout setup leads to price continuation, then it is a higher odds trade:

• What if you were a 2-3 contract trader – would you at the higher odds of a price pattern breakout strategy to trade the bigger size?
• What if you were an addon trader but only traded 1 addon in a given swing – would you look at the higher odds of a price pattern breakout strategy to do an additional addon?

I would answer these questions as yes, these would be profitable ways to benefit further from these trading strategies.

Renko Chart Pattern Breakout Setup

On this chart, I have squares drawn around 2 potential Renko price pattern setups, but they are completely different regarding tradeable strategies. Click the link to compare the pattern breakout trade to our Renko base trade setups.

The trading pattern strategy for a sell breakout consists of the following:

• Price test that can’t be traded because there are less than 3 bricks of room to the price and is considered to be a filtered or avoided trade
  • This is most clear at the left blue square on the top trading line – if this weren’t a price filtered setup, then there would be a short on the price envelope reverse.
  • You can compare this to yellow circle1, a price envelope reverse buy.
• Two price tests of the line, with a lower brick high for a sell pattern setup
  • Slow momentum [blue-purple line] must continue to flow down on the retraces or counter bricks
  • Fast momentum [yellow line] must break above the lower extreme on the counter brick and then break or hook back below on the directional brick
• Sell the yellow square triple break of the line – this is the breakout and entry for the short Renko price pattern breakout trade.

Compare The Yellow Square To The Blue Square

Now compare the yellow square and blue square – do you see the same price pattern setup and trade entry?

• Price test at the line and left blue square – Note that this wasn’t an actual trading price, but I want it for comparison.
  • This is not the price envelope reverse, so if this is a tradeable setup, it would be a sell addon at the blue square.
• There are 2 brick lows at the blue square setting up the triple break pattern breakout.
  • But there is no flow to slow momentum; it has crossed, and the lines are essentially on top of each other – compare this to the momentum flow on the yellow square sell pattern setup.
  • There is no fast momentum hook, meaning it has almost retraced to the upper extreme line and back down, where we want the retrace to return to the middle of the range – again, compare this to the momentum hook for the yellow square sell pattern setup.
• Do not sell the blue square because regardless of whether this price existed – this would not be a breakout pattern trade entry.

Renko Chart Pattern Breakout Continuation

As mentioned above, the benefit of this Renko pattern breakout trade setup is price continuation after the break.

You can see how the top gray line acts as price support and how continuation came after the breakout. And in this case, yellow circle2 was an addon to the yellow square initial trade – with continuation back to the buy swing low.

The lower brick high triple break, with both slow momentum flow and a fast momentum hook, is not our only Renko pattern breakout trading strategy. But it is certainly one of my favorites – since it has higher odds for price continuation.

You can watch the video for further discussion and different trading scenarios for the chart above.

Click the link to watch the video:  Renko Chart Trading Pattern Breakout Strategies