Renko Charts The Complete Trading Strategy That Eliminates Market Noise Part 1

TITLE: Renko Charts: The Complete Trading Strategy That Eliminates Market Noise | Part 1 CHANNEL: Praveen Pathiyil DATE: 2022-05-17 ---TRANSCRIPT--- hello friends i am praveen patil i i’ve been into the stock market for the past 14 years i welcome you all for yet another renko video uh last time we have spoken about the renko being used as a predictor for the events in this particular video we are going to discuss how to use renko on a day-to-day basis in terms of making a trade and creating a successful trading strategy when it comes to trading strategies there is no hundred percent sure shot uh when it comes to the markets it’s always uh eighty percent more than about that uh any any successful uh strategy should be applied with the success ratio of more than 80 percentage today what we are going to discuss has the ratio of approximately 87 percentage once we say that successful phase trading strategy it should be applied well across all the different instruments irrespective of the time frame it should be a common uh success uh strategy only once it has been tested across different instruments at different time frames we have come up with this particular strategy to roll it out to for the beneficial of the traders so let us go straight into the chats of understanding how to apply this particular rancor trading strategy and what are the little secrets that are there in terms of making a successful trading strategy with respective to that of renko charts so let me pull the charts for you okay so you can see that uh i use the trading view platform for my uh day-to-day trading as well as for the professional part apart from this software we have been using the other software’s also but uh this is a little uh user friendly and now it can be practically uh taken wherever you move around with whatever device you have so in this particular charts the first thing that we need to do is like this is a default chart setting that comes along with this particular platform we are changing the charts the normal candles to that of the renko charting here you go so we have converted the normal candles into that of the rango candles by this this is by default so there are a few things that we need to understand uh even before we define this particular charting in training view there are renko candles with wicks in it the first thing that we are going to do in this particular thing is kindly remove off all the weeks so i’m just deleting all the weeks i don’t require the wicks the logic is very simple that which means that we are trying to inculcate the noise the beauty of the ranko charting itself is to eliminate the noise completely and to just concentrate on the trend part so thereby eliminating the week you will see that there is a smooth flow of ranco chart in this particular presentation like in the last video or you must be definitely knowing the basics of the renko so we have discussed this again and again that it’s a very simple i presentable manner in which uh the renko chart is formed uh rather than getting into the confusions with lot of the candlestick patterns and all those things it has just have only two types of bricks the bullish bricks and the bearish bricks that is the reason as to why uh people love using rainbow candles more than any other form of charting if you were to look at it it’s as simple as that uh you buy it when the new green candle is formed and uh hold it till the first red candle is there once the red brick has been formed then you exit and uh take a trade on the opposite side it’s as simple as that but this is a basic definition of how do you go about the renko charting looking at this particular wrinkle chart now the purpose of this particular video is not uh the basic one we are going to go in depth to understand how these are being plotted and what are the little kept secrets so that you can become a much much much refined and a successful trader when it comes to using the renko trading uh strategy is concerned so let us go in detail so first thing you need to keep in mind is that the renko charts have been in use since 1830s in in the eastern part of the world the japan i would say that japanese traders were really successful when compared to that of even today’s traders uh even though there were no many modern trading tools or techniques or uh advancement like what we have right now they were much much much more successful than what we could find a day-to-day trader in the present world the logic is very simple that they were keeping it very simple all the things very easy they didn’t had too many tools or the indicators as we have been bombarded with thousands and thousands of indicators that we are working on in the current environment so they were simple down to earth people who believe that simple things works much better than anything else they have put in a lot of hard work in finding out the real truth of how the markets move and all those stuff unfortunately it so happened that in world war two uh most of the really kept secrets has been destroyed in the war and uh whatever is left behind from from the ruins we dig deep and try to find out how things were in the pre or the pre-world war two era so a lot of things were gone missing but we try to find out the little best kept secrets whatever we could dig it out and try to present it in a successful manner this is what we have been doing again and again so let us go to today’s topic after discussing the background uh let us go and find out how to make it a practical way of putting this into a strategy okay now if you were to look at this particular form of renko charting you can find out that the brick size is atr 14. we usually get a lot of questions over the mail over the phone whatsapp and all those things people ask me a lot of questions like uh for this particular instrument is the break size bean so and so say suppose 100 or 200 is that the correct way to keep it or people ask like atr 14 is good enough for how good is atr 9 or 80 or 10 or whatever be it so some people used to ask me like which is the right time frame for this particular instrument which is that indicator that needs to be used for this particular time frame and all those things first thing you need to understand when it comes to practical ability or the most successful use of renko the simplest logic that i will say is that understanding the renko itself holds a key 80 percent of your success purely depends on how well you have understood the renko bricks or in simple words defining the brinco bricks size is eighty percent of your work completed with eighty percent successful ratio which means once you get the right brick size you’re done the other things is just an add-on the main part of the success story is defining the brick size so if you were to look at it even in this particular software if you go to the settings you will understand that when it comes to defining the box size there are two methodologies used in this particular software as well the atr and the traditional the japanese people japanese trader whoever has introduced or been using in the 19th century they have been using only the traditional part which means in traditional part you need to define the boxes when it comes to atr atr has been the uh average true range itself has been introduced uh only in 1970s uh later late of 1970s so you can understand that atr was not usually or conventionally used in the original methodology of renko charting so traditionally box size has to be defined by us so what is it what is it that how do you go about uh fixing a box size say i say suppose i have fun giving a chart of dow jones or uh say if even if i give a bitcoin this is bitcoin chart how do you go and define yourself without knowing anything about this particular renko charting how do you go and define the box size tricky isn’t it okay now here is where the results come for us we try to dig deep to find out how actually in the conventional method what what was the logic behind uh defining a brick size because when we see like uh two or three traders uh uh defining the brick size for the same instrument the same manner how do they get along with the same kind of brick size was there any common logic behind it was a key question that was going around with me so doing a lot of research i could understand that somewhere closer to 1912 or 1914 charts revealed that they have been using the half of the nine period average of the absolute range as the brick size so let me come the absolute range means the high minus the low you take the absolute range for the past nine days say suppose i’m just giving an example for the last nine days the range was exactly hundred so you take an average of nine of the sorry the averages of the last nine period which again comes to that of 100 and you’re going to divide it by two i’m repeating the statement they have been using half that of nine period averages of the absolute range that was the secret that they have been keeping uh well with them so what happens in this case if it is hundred for the last nine nowadays the average also comes to that of 100 you are taking the 50 as the brick size okay this is what they have been using now what happens over a period of time this formula has been uh eroded or completely gone away with uh the introduction of so many indicators especially from 1960s there were bombardment of indicators being introduced and right now we are sitting with thousands of indicators probably more than that so what happens is like from 1980s we have started using or we have completely forgot on how to define this particular brick size there’s no documentation there’s no evidence that this is the way that you need to define this particular brick size it is purely based on a lot of conversations a lot of research that we put in we have found out that this is one of the way that they have been defining a brick size for a successful trade when it comes to the renko charting now what happens after 1980s once you have completely forgotten about how to defend this brick size and all those things ranco charting has completely lost this term people have started forgetting about the rancour chart only with the introduction of average true range as an indicator people have started uh talking again back about the wrinkle charting definitely yes but the video that we we exposed wherein we exposed the one beautiful secret of predicting events has made it to a quite popular uh form of rainbow charting in india and i am very thankful for the film bridge for giving me that opportunity to expose one secretively kept method to predict events after that particular event people have been talking widely about renko i see many uh software companies coming up with tango charting so it was like giving a real life to the renko itself now i’m coming up with a strategy it took me years even before that i had to do a lot of research to understand whether this was the real kept secret how this been used in the day-to-day practical world a lot of efforts were putting on for the past three years now and after that i am coming up with this particular strategy now i’ve told you that this is the way that they have been using in the past you can try it out after that with the introduction of average true range things were much easier people have just replicating like people have started replicating this average true range instead of the original way of defining the brick size now today in my uh after a lot of research uh what i have concluded is like if i ask you like to go back every day or every after completion of every break or the trading period you take back the absolute range for the last nine days then you take half of it and all those things it becomes tedious i know now people are more tech savvy than hardworking though people definitely are there who do a lot of calculation even now with papers papers and pencils yes definitely people are there who put a lot of efforts i’m not denying it for the benefit of everyone i have find out that one easy solution how to how to go about defining the brick size and this is a new methodology of combination of the old system with that of the average uh true range in this particular system the brick size is being very clearly defined by me like it’s very clear you go whichever time frame you want you selected it’s not about the time frame there is no question of the right time frame there is no such thing of a right time frame it is all about to do with right brick size with reference to that particular time frame so in this particular chart if you were to do what does exactly that we are going to do by default atr 14 is 529 for this particular bitcoin now what i’m going to do is like i’m going to convert this particular thing into my own style wherein i’m going to split this particular thing into half of it so this is a bitcoin a daily time frame atr 14 by default settings is 529 so i’m just going to take uh 265 which is half of it so i’m just going to look at this i’m changing the box size from atr to that of the original methodology the traditional one wherein i’m going to define the box size so 265 is what i have got the value which is just half of it half of atr 14 this is how i am going to define this i just plotting 265 clicking it and i’m done this is the easiest way of getting converted into real-time rainco chart and what do i do with this particular style the logic is very simple say suppose if i’m taking a trade here by the convection method like first break being a green brick i’m entering along in the third candle i’m revising the stop loss here okay that’s it i’m not going to do anything else as long as i’m going to get a red candle where and i’m going to get out of this particular position and go reverse okay originally when i entered at this particular break my stop loss would be at the base of the previous red brick i will revise my stop loss to that of the third brick as soon as it has been formed y3 you may ask the logic is very simple i have seen many documentation with regards to the japanese way of doing the trade they have focused again and again on number three number nine number 13 again and again they were very keen on that but those numbers the logic is like even if you go go and find out there is a chart itself which says tlb or the three line break charts they were defining that particular uh system purely on the three line break with so basically like they are giving more focus on these particular numbers the three the nine the thirteen you can even ask there’s the logic behind why they have been using half of the average of nine of the absolute range the logic was very simple only if you were to look at it uh the japanese mark stock market used to work from monday to saturday so basically that gives two weeks at 10 days 12 days so they have been using 12 plus 113 that’s more like the way that they have been doing was more disciplined manner they had a logic for each and every number that they have brought in with the replication of the multiplication of three was commonly used so in this particular system what we find is like uh i’m just using the first stop loss as the previous red bar from there on the third bar i am going to revise this particular stop loss and the next trade that i am going to take is whenever the red candle is being formed till then i am not going to exit that particular position you can keep revising the stop loss upwards that is up to you but in this particular system to be fair enough i’m just keeping that i don’t lose out on the running of this particular leg so i’m just revising only once thereafter as long as i’m not getting a red brick i’m going to hold that particular position so what what exactly we are going to do here is very simple it is not about the time frame it is like you can apply this particular thing in any different uh time frame just going to the 30 minute uh defining the brick size is all important now first i need to go and find out what is the atr 14 value with respect to 30 minutes start atr 14 for bitcoin 30 minutes is 114 so i’m just going to take half of it or for my brick size defining my brick size so it comes to 57 i’m going to change it to the traditional part 57 and here i am done with it just taking your different different charts this is dow jones minutes first i need to go and find out what exactly is the atr 14 value was it’s again 114 57 i’m done just going to the crude oil a different time frame maybe say 15 minutes chat need to go and find out the first thing atr 14 the 15 mils is 0.22 i’m redefining it traditional 0.11 which is half of it here i go bitcoin i’m coming back to the bitcoin because bitcoin or the forex uh uh we have seen that uh forex and the bitcoin now is where uh the renko works uh uh pretty awesome like the success ratio is more than 92 percentage so i’m just using the 15-minute time frame on bitcoin to find out for probably 10 minutes i’m just changing i’m trying out uh different time lines time frames actually so atr 14 for this particular bitcoin instrument on 10 minutes is 88 so i’m just going to divide it into half which is 44. here you go so you get a lot of so it is not about defining the time frame uh which is the correct time frame it is all about understanding the brick size how do you define this particular brick size and there is another one thing that you need to keep in remembrance that we are taking half of atr 14 which means you need to revise this particular defined box size every seventh period getting it go and recheck whether there is no major changes after the seventh period so in case there is what happens is like average true range is purely based on the volatility right so what happens is like over a period of seven periods the volatility might increase especially like if you’re using uh that of the daily chart only the daily chart and above that particular time frame is where we need to go and change this particular uh real not changing like go and recheck whether the atr 14 value has changed or not over and above the 7 day period or the seventh period itself like if you’re using weekly weekly candles then you have to go and do it after the seven week period probably i don’t think we will be using it beyond the weekly candles that is the maximum that we will be using in terms of the raincoat charts itself mostly this particular strategy is going to be for the uh intraday players and very short-term uh positional players wherein you are not going to hold the position more than uh two to three days so if you are looking out for this particular thing like 10 minutes start after the seventh period which is approximately one hour and ten minutes you need to go check re rework on this particular atr 14 whether there is a major change in that particular value then you need to adjust with the break size and over a long period of time this would change so if you were to look at it uh this chart will show a lot of whip sauce at the earlier time frame because the atr would have been completely changed so it is always good that you stay with the present it’s very hard for the back testing to be done the logic is very simple you need to keep calculating again and again and again and again to do this particular back testing that is the reason as to why it took me approximately three three and a half years to do the live testing then come in front of you to explain what really is happening with this particular definition of the brick size only thing that we can do is that you do the paper trade for the next six months or seven months you will understand the power of defining the brick size the conventional way and i have been doing the old method also wherein i take the absolute range uh go to the ninth period take half of it i’ve been doing that along with that of or 14 values defining it by half of it the atr 14 values it is almost the same hardly there is a difference of one to two percentage uh between these two values that is the reason as to why i thought like uh we’ll make it little bit uh simpler uh you need not go back again and again to find out the absolute range of the last nine periods and take half of it let us make little bit simpler wherein you note down atr 14 value divided by half of it for that particular time frame that becomes the the best break size to work with right so it’s all about it’s not about the instrument it is purely depending on the not even the time frame even here not about the instrument not about the time frame it purely depends on what exactly or how are you going to successfully define this particular brick size once you have defined this particular brick size then you can you can make your own definition of how to make an entry or how to make an exit i’m just giving you an example i’m i’m not a big fan of indicators but in this particular scenario let’s go for nifty in the nifty i’m just using this particular thing again i’m saying the first thing that we need to do is i’m just giving you 30 minutes start go and find out what is atr 14 value it’s 53 so i’m just going to use 26 as my brick size here you go so what i’m going to do is like i’m just going to give you one indicator uh it’s commonly used most popularly used nowadays the super trend i’m just going to define it i like you can use uh 10 period with the multiplier of 1 to whatever you feel like ah over the back tested period what i feel is super trend of 10 factor of 3 the multiplier of 3 works really good so i’m just using plotting that particular indicator along with this particular chart as simple as that so defining the brick size again and again i’m saying defining the brick size is all about your success element is if you can define that particular brick size eighty percent of your success is done the remaining is just entry and exit the second thing that i wanted to focus here is there are charts wherein you will find the candle information say some something like this i’m not taking a trade here i’m just showing you that there will be candles like this bricks will wherever it is in formation kindly ignore them like how we have ignored the wick it is always good that you ignore the information bricks right so it’s all about understanding it’s just a guy it works even for the just giving you a pair of usd canadian dollar just showing you first i need to go and find out the idea value this is point zero zero one nine so i’m just making it half of it which means like i’m going to take it point zero zero uh zero nine good the last two trades were really good and i’m erasing it on a 30-minute chart probably players who are into the forex market we’ll be using uh five minutes or a ten minutes or a brick size or the sorry the uh five minutes time frame or the ten minutes uh time frame so i know that uh people are there who love to take a option straight with respect to that of bank nifty in india i’m just showing you like uh if i were to use 30 minutes start on the bank nifty i need to find out the value of atr 14 first atr 14 comes to 193 which means i’m going to take a trade on the value of i’ll take 96 which is half of it here we go so the last trade that i have got was uh entry at the maximum value would be uh 20 064 i don’t mind i’m taking the highest value of this particular after the breakout the close was twenty thousand sixty four i’m taking that particular trade and i’ve exited at the lowest value of this particular short site which is uh twenty one thousand five not four so approximately the last trade would have been approximately 1500 points in this particular bank nifty instrument you can define the time frame depending on the risk parameter that you have defined so the ideal way of choosing the time frame that also i give you a hint on how do you define an ideal time frame the logic is very simple uh go and find out the atr 14 value whichever time frame that you are comfortable with say suppose if you’re trading or taking a trade in nifty or bank nifty go and find out atr well 14 values in uh daily time frame the 2r chart or the hourly chart go and try to find out 80 or 14 value so every chart will give you a different different points ask yourself which is that particular risk maximum risk point that you can afford to lose that defines your time frame says of course i’m saying that in indian nifty i can’t take a risk more than 50 points so what i do go to the nifty chart need to find out it which time frame that 50 points come in is it 30 minutes start 30 minutes start has atr 14 of 50 points so this is my time frame this is how you define your own style of time frames choosing the time frame rather than rather than asking which is the right time frame that is a wrong question the right question to ask is how much you can afford to lose then try to find out which time frame defines that particular points and take half of it uh to convert into that particular your own the right way of defining the brics size and integrate this indicator or probably any other indicator whichever you like so here nifty 50 50 points is my uh stop loss or i would like to have 50 points as my stop loss i go and make it half of it in the traditional method 26 now here comes my chart you can define it but don’t give which is practically impossible say suppose i i am gonna trade in bitcoin and i don’t i’m not interested in losing more than one dollar give it a practical thought how much you can lose then try to find out the right time frame people are there like they’ll say like nifty i don’t like to lose more than one one point practically impossible don’t do it give it a sensible stop-loss a sensible definition for your surplus and the most important thing that you need to understand once you have entered in a particular time frame say suppose this nifty 30 minute is worth when i have taken a trade exit in this particular time frame only don’t try to change the time frame and juggle it out with the different time frames right commonly that’s a mistake that where wherein people will do that is where i said like uh you need to have a very good discipline like the japanese traders did once you are entering into a particular trade try to stick with that particular time frame as long it is complete and remember whenever you are using a time frame less than that of two-hour chart in my understanding i am saying in my understanding there is no uh definition of such anywhere written in any books or any uh legal form that whenever you are making a trade with less than two hour chart you are becoming a intra-day player even i will say like two hours itself is like little bit higher especially for uh especially with the markets wherein you have six and a half hours so it’s basically for uh the future players that i’m speaking about you can say like anything less than one hour time frame you are actually a intraday player try to exit by end of the day rank trading strategy this particular system works really well for the intraday players and the short term traders like for two to three days nothing beyond that and remember to redefine this particular break size at every seventh period of the time frame that you have chosen try to try to take a trade with a particular time frame and try to exit the trade in the same time period same same time frame of that particular chart you can create your own system but as i said this particular video is all about bringing you the real secret of how do you define a brick size in terms of the rainco trading strategy because defining this brick six brick size is what you’re going to give you 80 success people have forgotten people have really forgotten how to do the traditional method and this is the reason as to why this particular video was made to bring back what has been lost from the minds of the beautiful traders ever seen in the history the japanese traders were using it practically with this particular renko trading system i’m repeating as a summary for the benefit of everyone renko is the beautiful and the simplest way of presenting the charts number two when it comes to the success of renko it is purely on the definition of the brick size rather than anything else third define the brick size like the traditional players used to do i’m not asking you to do the work manual work i’ve given your simplest formula go to atr 14 of any time frame of your favorite instrument try to try to take 50 percent of that and that becomes the brick size for you and keep revising this break size at every seventh period of your time frame it is not about the right time frame it is all about defining the right break size when it comes to the success of this particular ranco trading strategy integrated along with i have given a indicator because basically i understand that people will come and ask me give me an indicator along with this i’ve tried out with many many indicators i’m not a favorite of any indicator i suggest like i don’t even suggest any indicator for that matter because a person understand a real chat is to understand indicators are just a derivative of the price movements so you unless and until you know how to read the actual price moves there is no point in understanding the indicator so as a kick solution i have given you a super trend 10 mark factor of three based on my studies you can always you’re always welcome to try out different indicators a different time frame but just an in quick solution that i have been provided in this particular video so thank you so much for watching this particular video if you have any questions please do email me with the right question to get an answer from me because i’ve been bombarded with males after mates with a lot of questions ask me the right question and you’re there i’m ready to give provide you with a very good answer it’s my duty to answer you with the right answers for the all the right questions but remember friends when it comes to renko franco is most powerful for the day traders for short-term players provider you understand in defining this particular brick size it’s all about the brick size nothing else you are defining it right your definition will turn out to be at least 80 success ratio in whatever trade that you are going to take so that’s it for this particular video thank you so much for staying with us we’ll bring more uh secretive methods that has been followed in terms of the technical analysis is concerned thank you so much for watching this particular video please do leave me questions uh at the mail id that i am providing along with this particular video do write uh your questions to that particular email id only so that i can give you a reply to what exactly i feel about after reading your question thank you so much for watching this video again we’ll try to bring more and more videos like this with little kept secrets of technical analysis thank you so much