Renko Trading System Trades Setups And Day Trading Profitability

The Renko trading system trades setups that we will use come from our Renko trading method.  But one of our primary method trade setups has to be eliminated because of its impact on day trading profitability.

Consider the potential trading profit differences between Renko system trades and method trades. When doing this, I immediately have to think about a trading system being traded mechanically without trade filters.

Thus, the price envelope reverse setup that is used in method trading for entering where a swing begins, can’t be used.  The reason for this is that there would be no way to filter this trade in a Renko trading system for all the times that it occurs inside of consolidation.  The day trading profit losses from system trading inside of consolidation would be greater than the profits gained when the trade was outside of consolidation.

And again remember that the price envelope reverse setup inside of consolidation would not be an issue for our Renko method because our trade filter for this market condition would avoid taking the trade.

Renko Trading System Trades Setups

We have 3 Renko method trade setups:  (1) price envelope reverse (2) midline reject (3) price extreme reverse.  In essence, we will have to eliminate the trade setup that starts a swing, while retaining the setups that show momentum continuation and/or a momentum extreme reverse.

Let’s review these trade setups further and consider their day trading profitability as Renko trading system trades setups:

Price Envelope Reverse

As noted above, this trade setup that starts a trading swing will have to be eliminated because of the frequency that it can occur inside of consolidation. Additionally, this is a trade setup that can also be price or momentum filtered for Renko method trading as more reasons for not including this in the Renko trading system trades setups.

Midline Reject

The midline reject trade setup includes 2 momentum components, so there is no issue about being a counter momentum trade.  Yes, they can occur inside consolidation but with far less frequency than the price envelope reverse.  There could also be an issue with the trading room to price, but the momentum components tend to reduce this lower profit odds impact.

Price Extreme Reverse

Since this trade setup occurs after a price and momentum extreme, this trade will not have had a trading method filter from counter momentum or consolidation trade entries.  A price filter could be an issue, but since there can only be 1 trade setup filter to affect our day trading profits this will be included as a Renko system trade.

Renko Trading Systems Trades Chart Review

The chart below is marked for the Renko trading systems trades in yellow circles, with the blue circles being potential system trades but they do not have the necessary setup components to be traded.  Note that a setup component is a rule that makes for a valid system trade – it is not a Renko trade setup filter, which would not be used for mechanical trading.

The day trading profit management is marked by the blue squares and orange squares, with the blue squares being trade profits and the orange squares being trade losses or exits.

Renko Trading System Trades Setups And Day Trading Profitability

I am going to discuss all of the Renko trading systems trades setups and profit management in the video.  These system trades will done as 2 contract trades.

But to get started and take a look at the Renko system setups that will be traded, consider the first trading swing and swing reverse at the left of the chart:

  • Yellow circle1 midline reject buy – if you look at the momentum indicators below the chart you will see the necessary trading system components for this trade, which is the slow momentum flow and the fast momentum hook
    • The blue square is a 4 brick system partial and the trade is exited at yellow circle2
  • Yellow circle2 is the exit for the Renko system buy because it is a price extreme reverse sell – this system trade must have 5+ consecutive directional Renko bricks from the last price envelope reverse or trade setup
    • The blue square is a 4 brick system partial and the trade is exited at the orange square where the price envelope reverse takes the trade flat

Click Link To Watch Video:  Renko System Trades And Profit Management
 

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