One of the traps most Forex traders get sucked into is the "Search for the Holy Grail," also known as the Search for that One System that will put me on Easy Street. In this article I'll explain why there is no such thing as a "Holy Grail" trading system and how to determine which Forex trading method works best for you.
In every book, article and blog post I've ever written, I inevitably end up writing the following: There IS NO Holy Grail when it comes to Forex Trading. The closest you will ever come to finding "perfection" in the Forex markets is Money Management. Those who master Money Management skills can outlast any downturn, reversal or run of bad luck and live to trade another day.
In spite of my constant proselytizing, people are still certain that "perfect" trading system is out there somewhere, waiting to be discovered.
As much as I LOVE Renko Charts, I am the first to admit they are not perfect, and I have days trading when I would be better off going back to bed and forgetting about Forex for the day. The reason this happens is the Forex markets are never constant. That means for the next 30 minutes the market could be trending solidly in one direction, and in minute 31 some event (scheduled or otherwise) can occur that will instantly wipe out whatever gains were made in the previous half hour.
Does that happen every day? No. But it happens often enough that traders are forced to keep in mind the possibility of it happening, and that can affect how they trade. No charting method, no system, no robot trader can protect you from these sudden vicious reversals.
So keeping all of that in mind, the question remains: what is the best trading method to use with the Renko Charts?
The answer is simple: Buy when you see a blue (bullish) candle close, Sell when you see a red (bearish) candle close. The larger the Candle/Box size you are using for your Renko Charts, the more likely you are to see another candle of the same color close.
My studies have shown repeatedly that if you use a 10 pip Candle/Box size, there is a 78% chance the next candle that closes will be the same color as the most recent closed candle. This means you have an almost 4-1 chance of seeing another 10 pip move in the current direction. All that is left for you to do is TAKE THE TRADE!
There are certain indicators you can add to your chart (such as the Heiken Ashii Smoothed, the Slope Direction Line, the BBand) that will give you entry and exit signals that also give you a better than 50/50 chance of capturing the middle part of every price move (again, when using 10 pip Candles/Boxes).
There is a school of thought in the investment world that believes it is best to try and capture the middle third of any move, under the belief that it is impossible to accurately gauge the beginning of any trend, and equally impossible to know when a trend is about to collapse.
If you happen to subscribe to that theory, then by all means add as many indicators as you find necessary to isolate that "middle section" and trade accordingly.
However, using Renko Charts you have a distinct advantage over the "middle " traders in that you can clearly see on your charts where trends, begin, how long they last, and where they end.
And in terms of being able to open your charts and know with a nearly 80% degree of certainty that you are going to bank a minimum of 10 pips, nothing beats trading naked (without any additional indicators) and simply entering a trade in the direction of the previous candle.
In every book, article and blog post I've ever written, I inevitably end up writing the following: There IS NO Holy Grail when it comes to Forex Trading. The closest you will ever come to finding "perfection" in the Forex markets is Money Management. Those who master Money Management skills can outlast any downturn, reversal or run of bad luck and live to trade another day.
In spite of my constant proselytizing, people are still certain that "perfect" trading system is out there somewhere, waiting to be discovered.
As much as I LOVE Renko Charts, I am the first to admit they are not perfect, and I have days trading when I would be better off going back to bed and forgetting about Forex for the day. The reason this happens is the Forex markets are never constant. That means for the next 30 minutes the market could be trending solidly in one direction, and in minute 31 some event (scheduled or otherwise) can occur that will instantly wipe out whatever gains were made in the previous half hour.
Does that happen every day? No. But it happens often enough that traders are forced to keep in mind the possibility of it happening, and that can affect how they trade. No charting method, no system, no robot trader can protect you from these sudden vicious reversals.
So keeping all of that in mind, the question remains: what is the best trading method to use with the Renko Charts?
The answer is simple: Buy when you see a blue (bullish) candle close, Sell when you see a red (bearish) candle close. The larger the Candle/Box size you are using for your Renko Charts, the more likely you are to see another candle of the same color close.
My studies have shown repeatedly that if you use a 10 pip Candle/Box size, there is a 78% chance the next candle that closes will be the same color as the most recent closed candle. This means you have an almost 4-1 chance of seeing another 10 pip move in the current direction. All that is left for you to do is TAKE THE TRADE!
There are certain indicators you can add to your chart (such as the Heiken Ashii Smoothed, the Slope Direction Line, the BBand) that will give you entry and exit signals that also give you a better than 50/50 chance of capturing the middle part of every price move (again, when using 10 pip Candles/Boxes).
There is a school of thought in the investment world that believes it is best to try and capture the middle third of any move, under the belief that it is impossible to accurately gauge the beginning of any trend, and equally impossible to know when a trend is about to collapse.
If you happen to subscribe to that theory, then by all means add as many indicators as you find necessary to isolate that "middle section" and trade accordingly.
However, using Renko Charts you have a distinct advantage over the "middle " traders in that you can clearly see on your charts where trends, begin, how long they last, and where they end.
And in terms of being able to open your charts and know with a nearly 80% degree of certainty that you are going to bank a minimum of 10 pips, nothing beats trading naked (without any additional indicators) and simply entering a trade in the direction of the previous candle.
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