How to use Renko chart and earn easy profits.

Renko Chart

There are lot of charts available out there such as line chart,bar chart and widely used candle stick chart,many of you don't know that this charts can be used specifically for different analysis.
Today In this blog were gonna look at Renko chart and I am gonna teach you a simple strategy based on this chart to earn easy profit just by doing some analysis.
Were gonna apply this strategy in options trading of indices (nifty, banknifty etc)
If you don't know anything about Options then click here to learn about it.

Renko chart is composed of bricks which are plotted at 45° to each other,bricks do not occur next to each other even the price of stock is same for a period of time.
A brick can be of any price depending on stock .This is called Box size.Lets see a example to understand it.
Lets assume a stock is trading at 100 rs and box size is of 5 rs.If price moves up at 105 rs then new brick will be appeared showing uptrend.If stock is trading between 100 rs and 105 rs new brick will be not drawn and if price moves back below 100 then new brick will appear showing downtrend.
Renko chart reduces lot of noise and shows clear indication of trend unlike candle stick chart.

Clear Indication of trend shown by Renko .

Increasing or decreasing the box size will affect the smoothness of the chart if you increase the size of the box it will reduce number of swings and noise but to find out reversal will become difficult similarly if you decrease the box size it will increase number of swings and noise but to find out reversal will become easier.

First of all select Renko chart of any duration between 1 m to 15 m.To get clear indication we will use stochastics indicator on the chart.

I have choose Bank-nifty CE Dec series option as a example.
Here the brick size is of 15 rs.Brick is drawn best on closing price,Hence price movement in between are ignored,to form a new brick 15 rs movement is required either up or down.
Always buy at reversal condition.
Only buy when stochastic graph moves above 20 mark and sell when it moves below 80.
Wait for third brick which will be the entry point.
Exit point will be third reversal brick.(As per your comfort book profit).
Check out the above image you will get the clear idea.As you can see lot of noise is reduced in Renko chart.

Highs and lows are ignored.
Renko charts are not as detailed as candle stick.As it leaves lot of price data.
False signals,whipsaw effect can be generated.

Good to use in options trading.
Always use a indicator.Beside Istochatsic you can also use RSI,MACD,Aligator etc.
Always use stop loss as less price data is available in renko chart.
Always buy small lot size as trading in option is risky.