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.
However, suppose your trade is profitable. Seeing profits emerge in your trade is exciting. But the technical challenge is to recognize when to exit a profitable position before your profit turns into a loss. These challenges are real as many traders are unable to get out in time and protect their profit.
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.
Renko Charts are a bit different than usual trading charts. Renko in Japanese means a brick. That's why these charts are also known as Renko Brick Charts. When the market moves by a small predetermined amount, a brick is added to the chart. In case, the market had made an up movement, you add a green, white or gray brick. The choice of color is yours.
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 way, you never lose your profit in the market. Renko Charts can be used for intra hour trading as well as intra day trading.