Renko trading strategy can be an effective way to trade the markets. So you get the obvious question of how to use renko charts?

I can teach you what I know about these relatively new forex price charts. Are you ready?

A decade ago, my curiosity to find out more about trading charts beyond candlesticks led me to investigate renko charts.

After spending countless hours scouring the internet and looking at various forex trading websites in search of credible information, I dug my way through. It was a very time-consuming task to say the least. But I wanted to know more about these “brand new” forex charts.

What you will read here next, is my decades worth of research into renko bars. I can’t of course put all my learning into just a few works.

But in a nutshell, I learned 3 important secrets about these currency trading charts and I want to share them with you!

## Three secrets to success with renko bar trading

Are you excited? Then grab a pen and get ready to jot down some very important information.

**Secret #1** – I learned that people like you and me can download and use these charts for FREE!

Yes! You can find forex renko charts available at most reputable forex brokers online. And you can use them for free. They are available on many different charting platforms. From MT4 to tradingview renko charts.

**Secret #2** – Forex traders can easily identify key areas of support and resistance and they are better able to identify early price trend reversals!

The renko bricks are made up of “bricks” which are either bullish or bearish. A green or white brick suggests rising or bullish prices. And bearish prices are represented by either a red or white brick that form.

As you know, the market goes up when it is bullish and the market falls when it is bearish.

**Secret #3** – 95% of the frustration with renko trading lies with the belief of trading in the direction of the current renko bar.

For example, day traders could see a couple of consecutive green bullish bricks in a row. When they see this, they automatically assume this is a reason to “jump on the trend” and open a long trade.

Do you want to avoid this mistake? Then look for a simple renko bar pattern to form on your renko charts.

These patterns repeat themself over and over for each currency pair.

## Five ways to improve your renko trading strategy

What are the important elements in developing a Renko trading strategy?

To answer that question, we need to know what a good trading system is made up of. We can then use this information to assist us in developing a Renko forex trading strategy.

There are five important elements in a solid trading approach. These 5 elements are:

- Accuracy
- Reward to Risk Ratio (Reward/Risk)
- Expectancy
- Position Size
- Account Equity

**Accuracy** measures how many times you trade closed with a profit. If we made 10 trades and won 7 in total, then your trading accuracy is 70%.

The **Risk to reward **ratio comes next. This element measures the relative size of your winning trades comparing to your losing trades is known as the Reward to Risk Ratio.

If you risk $30 to make $60, then your reward is $60. Therefore, your Reward to Risk Ratio is $60/$30 or simply a 2 to 1 Reward/Risk Ratio.

A trading method which risks $100 to earn $50 on a winning trade has a $50/$100 or 1 to 2 Reward/Risk Ratio.

**Expectancy** represents how often you are able to place a trade, or opportunity. If you place 10 wagers per month with your system, your annual expectancy is 120.

But if your system allows you to enter 5 wagers per day x 20 trading days per month x 12 months per year then your annual expectancy is 5 x 20 x 12 = 1,200.

**Position Sizing** represents money management. How “big” is our risk? It tells you how many units to risk per wager. The majority of traders use a fixed % of equity risk per wager.

The size of your account or account balance refers to your account equity. The previous 4 elements must take into consideration your account balance. A good day trading renko strategy should incorporate all five of these essential components.

If you are just a beginner to forex trading, then learn about the risks of trading first.

### How do we use these 5 variables to develop a Renko trading system?

This is what I suggest you do to improve your day trading system.

Almost every trader I have met longs for a trading system with 100% accuracy. But let’s be realistic here. It is just not possible.

I think too many market participants focus on just this variable. They continue to search for the “holy grail” system to improve their accuracy. Such a trading system does not exist. Or if it does, then we don’t know about it, for obvious reasons.

For our example let’s just assume we win 7 out of every 10 trades, or 70% accuracy.

Let’s use a simple and boring 1 to 1 Reward to Risk Ratio while we develop our Renko trading system. If we risk $50, our winners will be $50.

## An Example of a good renko trading system

We will start with a $5,000 account size and risk 1% per trade. We will trade 5 days per week and place 2 trades each day. This is equal to 40 trades per month. Our Account Equity is $5,000 and our Position Size has been defined as 1% risk per trade. Our opportunity, or expectancy to trade, is 40 trades per month.

We want to place 2 trades per day. I know I can place 2 trades per day scalping or swing trading. This would probably take 1 hour of our time each day. I will start by looking at Renko charts with smaller Renko bars such as 5 pip or 10 pip Renko bars.

I want to risk 3 to 5 Renko bars to gain 3 to 5 Renko bars. Remember our 1 to 1 Reward to Risk Ratio?

Let’s do the math together:

1% Risk per Trade = 1% x $5,000 Account Equity = $50 Risk Per Trade. The Reward is also $50.

If we risk 2 trades per day x 5 days per week x 4 weeks per month = we have a total of 40 trades. A 60% accuracy x 40 trades produces 24 winning trades and 16 losing trades.

24 winning trades x $100 Reward = $2,400 winning trades. 16 losing trades is -$1,600.

$2,400 + (-$1,600) = +800.

This is how you use the five key elements to a good trading system and apply it to developing a Renko trading system.