Advantages of Renko Charts
The most significant advantage of using Renko charts for stock trading is their simplicity. Renko charts are useful for stock trading because they make it very easy to determine where the support and resistance levels are. Furthermore, identifying a trend is fairly straightforward. The reason for this is that Renko charts filter out noise, allowing us to observe the trend more clearly since all price moves less than the brick size are filtered out.
Renko charts, because they are all about price movement, may be utilized to make trading decisions on their own. Once a support or resistance level has been breached, a buy or sell order can be set, along with a stop-loss if needed.
Some traders like to use the chart in conjunction with the RSI to forecast the market’s peak or bottom. Typically, they seek price and RSI divergence on the Renko charts. However, when a trend is very strong, the divergence may not be precise. Because the divergence signal emerges too early in the trend, the trade fails.
Ways to Use Renko Charts for Stock Trading
Support and Resistance
Renko charts make it very simple to detect support, resistance, and trendlines. A trade action might be initiated if the support, resistance, or trendline is violated.
Use Renko Chart Price and RSI Divergence
The RSI might be a useful indicator to utilize in conjunction with Renko Charts, but it might generate a buy or sell signal far too early in a strong trend.
Similar patterns, such as double tops or bottoms, head and shoulders, and triangles occur on Renko charts as they do on candlestick charts. Because there are fewer minor price swings on a Renko chart than on a candlestick chart, such patterns may be easier to see. This website provides a free Renko chart pattern scanner.