In this article, we will guide you in detail how to apply the Simple Renko Strategy to seek profitable trading opportunities from the currency market.
What is Simple Renko?
The original Simple Renko version is largely applied to the Renko Charts - a custom technical chart designed to make market movements simpler. However, it necessitates traders to install and use custom indicators, which is quite difficult for beginners. In order to simplify the strategy usage, we have modified a few crucial elements. Therefore, the technique mentioned in this article could be applied to any trading charts and any currency pairs. More details about the basics of the Renko Charts Strategy, and how forex traders can take advantage of it, are described in a separate article.
What technical indicators are used in Simple Renko Strategy?
Like most trend-sticking tools, the Simple Renko is composed of one leading indicator and one lagging beacon. A 20-period Exponential Moving Average (EMA) line is used in this system, having the responsibility to identify trending conditions and trading entries. Meanwhile, the system’s leading indicator is Stochastic Oscillator – a very famous momentum detector. Established with the setting of 14-3-3, this detector could filter out very proficiently wrong trading occasions that aren’t “strong” enough to be entered.
During the period from October 2016 to October 2017, our Simple Renko has generated for us more than 2500 pips of profits, with the win-rate confirmed at 85.33%. On average, there are around 25 signals appearing every month.
How to profit from the Forex market using the Simple Renko Strategy
As mentioned above, this technical system works well on any time frames and is applied to any exchanges. After adding the built-in indicators in MetaTrader 5, you can start seeking potential entries.
Conditions for long positions
A bullish opportunity is defined when:
- Prices turn above the 20-period EMA;
- Stochastic Oscillator lines move out the oversold territory.
Conditions for short positions
Conversely, a bearish signal is determined when:
- Prices break below the 20-period EMA Stochastic;
- Oscillator lines leave the overbought territory.
If you like this strategy, you might also be interested in this London Daybreak Strategy
Enter and exit rules
There are some significant entering rules when using Simple Renko System to trade as follows:
- Only one position should be entered at a time;
- The pierce-through candlestick must be fully closed before a signal is affirmed valid;
- The stop-loss should be set of 40-50 pips, while the take-profit could be up to 150 pips. After prices trade toward the expected direction about 40 pips, the stop-loss level should be transferred to the breakeven point. The position should be closed if the Stochastic Oscillator enters the overbought or oversold area.
Examples of using Simple Renko in forex trading
Of the system’s advantages is to predict strong long-term trends in the forex market and signal an end of technical retracements. Here are several examples of profitable trading signals with Simple Smart Forex Renko.
Bearish retracement bottom
The chart below shows how Simple Renko points to an end of the NASDAQ bear market in Spring 2019. After the correction started in Autumn 2018, many forex traders were trying to predict when the bear action would find a bottom. Once the rate crossed EMA20 from below, and Stochastic lines went off the oversold territory, a buy signal occurred. Long positions are still in play with a huge current profit as NASDAQ had rewritten all-time highs after the correction.
Another great example of a simple Renko scalping system indicating a start of a strong trend was noticed in October 2018 when EUR/USD was hovering around strong resistance in a consolidation range. Once the rate breached the EMA20 support, and Stochastic Oscillator went off the overbought zone, a sell signal occurred. After that, EUR/USD dropped 3.5% in one single month.
Simple Renko Trading System
- Easy-to-use, general-purpose;
- Engendering highly reliable trading occasions by the strict checking rules;
- Enabling traders to catch long trends.
- Requiring a high level of patience.
The Simple Renko Trading Strategy is a very effective trend-seeking technique, highly suitable for mid-term and long-term traders who tend to profit from trending market conditions. With a lot of big advantages mentioned above in addition to a high win-rate, we believe this trading candidate can make you huge returns in the long run as long as you strictly stick to its trading rules. Of course, risk controlling and psychology managing methods must always be applied along with the strategy because they are indispensable tools in your trading career. Don’t risk more than 4% of your account for each transaction.