Renko Chart Trading Strategy-Protecting The Pips Gained!
Never let your profit turn into a loss. In forex trading, a few seconds might be enough for the market to move into the negative territory and wipe out all of the pips gained by you. As a trader, your number one focus after entering into a trade is to determine when to get out. If the position is losing money, you can use the traditional stop loss strategies.
Protecting your profit in a trade is one of the most important thing for a trader. After all, what's the use of trading when you cannot protect your profits from the market! What you need is a good trade exit strategy.
You need to learn how to detect the change in market sentiment at the micro level so that you can capture and protect the pips that you have made. Renko Charts can help you detect changes in the market sentiment at the micro level. Let's discuss how Renko Charts are used by traders to detect market sentiment changes at the micro level.
On a Renko Chart, price movements are represented by bricks. Renko is the Japanese word for a brick. If the price moves up by a predetermined amount, we add a brick to the chart. The color of the brick is usually white, gray or green. However, you can select your own color.
Similarly when the price moves down by a predetermined amount, we add a new brick in the opposite direction that is usually colored red or black. You are free to select your own color. Each brick on the Renko Chart reveals information about the market sentiment at the various points in time. These bricks can be used by the trader as a way to identify the threats to the pips that have been gained so far in the market.
Now, you can select any price increment for the brick. However, the magic starts when you choose a very small price increment like 1 pip. This small increment will help you detect the micro level changes in the market sentiment.
A Bullish Renko Chart Pattern will appear as a sequence of green, gray or white bricks moving in the up direction. Similarly, a Bearish Renko Chart Pattern will appear as a series of red or black bricks moving in the down direction. So, how do you know it's time to get out? When three bricks appear in the reverse direction, it means time to get out. On the appearance of the fourth brick, exit half of your position and take profit. And on the appearance of the fifth brick, exit the remaining position.
This is the zero tolerance approach to taking profit in the market that avoids turning profit into a loss!
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Discover a very simple Renko Trading Strategy. Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade.
by: Ahmad Hassam
Total views: 53
Word Count: 468
Date: Wed, 3 Nov 2010
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