Renko chart trading price has a large effect on the decisions that are made in our day trading method.
I have always been focused on trading price. And when developing our day trading method setups, I viewed them in the context of the next price that would act as support or resistance – always asking the following questions:
- Why is this price relevant?
- How many other traders are also looking at this price?
- Has there been trading price action the last time at the same price area?
And most importantly for the trade setup – can I take the trade into this Renko trading price?
Renko Chart Trading Price Evaluation Video
In this Renko chart trading price video, I am going to discuss the following chart AND focus on the Renko trading prices and their effect on the trading decisions that were made.
NOTE that the chart ‘markings’ are drawn and discussed in the video.
To begin, look at the yellow circle on the Renko trading chart. It should be clear that this is a price envelope reverse buy trade setup.
However, I cannot take that trade until I know where the next resistance price is located. In our Renko method, we will not take a trade that does not have at least 3 bricks of room to support or resistance. We refer to this as a trade setup being price filtered.
The Renko chart trading price is at the gray line, which is significant since it’s the daily high. This price is 4 bricks from the trade setup, I can take the trade.
Look at the blue circle, which is another Renko chart trade setup called a price extreme reverse. This time the trade entry would be directly on top of the gray line, which shifts to support after breaking – so this trade I did not take.
What Determines The Significance Of A Renko Chart Price
Now I want you to think of price action at the gray line and its further relevance in the context of all the other traders that are looking at this chart. And this is something that I always consider, when determining the significance of a Renko chart price. After all, how can we make a trading decision based on price, if no one else is look at the same price?
This trading price doesn’t hold as support and it doesn’t reject as resistance, instead the price continues to straddle and go into consolidation.
And since we don’t trade inside of consolidation, there are no new trades taken. The profitable buy is above the consolidation area low, and is still long at the new high on the chart.
Now I want you to consider the Renko chart for price after the gray line broke, meaning that there is a new high AND further consider the price trading concept that when resistance breaks it shifts to support. Do you think that each new brick high is support after it breaks, and you should have new Renko trading prices at each blue line?
How would you ever trade if you continued to do this, your chart could become so full of prices that you wouldn’t see the Renko bricks anymore. And what about all the other traders, do they have trading prices at each of these points too – and when you answer, remember that chances are they aren’t trading Renko charts and are trading bar charts of different time frames or tick counts.
For my trading price analysis, I will continue to watch the original gray line, and then I will put a new resistance price at the high of the chart after it reverses and it is clear that the swing is over.
Trading Price Filter Followed By Price Failure Break
Since the price envelope reverse happens a brick above the gray line, I cannot go short at blue circle2, again it is price filtered. The trade is entered at yellow circle2, which is what we refer to as a price failure break. This means that the price being looked at as support is failing to be support.
The trade is also confirmed by fast and slow momentum – you can see the fast momentum hook and the slow momentum flow when the trade is entered. Right after that at yellow circle3 is another Renko chart trading price related trade, which is done as an addon trade.
You can see how price is related as it tests and rejects between the yellow circles. Also look at the fast momentum hook and slow momentum flow, again giving an indication of price continuation.
Finally, I want to talk about one more Renko trading price that would be on my chart at the bottom gray line. Why is this Renko price on the chart and when did it become relevant, since it wasn’t already on the chart like the top gray line?
Look at the red brick on the left side of the chart. This Renko trading price is the sell swing low before the reverse to the higher highs.
This is an interesting price action concept, because through observation and how frequently these prices act as support [a buy swing high before a lower low would be viewed as price resistance], it is clear to me that other traders are seeing this same price area.
And since the support price breaks and shifts to resistance, blue circle3 cannot be traded as a price extreme reverse buy. Instead, the trailing shorts that are still open after profits have been taken are held, and I am still short at the last brick of the chart.
Click link to watch video: Renko Trading Price Evaluation