The Renko trading system trades setups we use come from our Renko trading method. But one of our primary method trade setups has to be eliminated for system trading because it would not be filtered for price consolidation.
Consider the potential trading profit differences between Renko system trades and method trades. When doing this, I immediately think about a trading system being traded mechanically without trade filters.
Thus, the price envelope reverse setup used in method trading for entering where a swing begins can’t be used. This is because there would be no way to filter this trade in a Renko trading system for all the times it occurs inside consolidation. As a result, the day trading profit losses from system trading inside consolidation would be greater than the profits gained when the trade was outside 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 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 two 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 one 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:
- Yellow circles are Renko trading systems trades
- Blue circles are potential system trades but do not have the necessary setup components to trade.
- 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.
Renko trading system day trading profit management decisions occur at the blue and orange squares. The blue squares are where trade profits occur, and the orange squares are where trade losses or exits occur.
I am going to discuss all of the Renko trading systems trades setups and profit management in the video. These system trades will be made as two 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 char,t you will see the necessary trading system components for this trade, which are 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 set up.
- 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 the Video: Renko System Trades And Profit Management
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