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Explosive Ichimoku Renko Trading Strategy (How To Swing Trade Stocks Like A Samurai) - YouTube
Channel: The Secret Mindset
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If you are tired to study charts with overloaded
indicators, and just want to trade price action
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with less stress and guessing, then this video
might help you do that.
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I donât know if you are familiar with Renko
charts or with Ichimoku cloud, but let me
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tell you, those 2 techniques combined will
give you some decent entries and will filter
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a lot of market noise.
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So, in the following minutes, weâll go full
Japanese mode and weâll discuss about Renko
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and Ichimoku, and how you can combine these
2 approaches in a trading strategy.
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Before we continue, if you are new to the
channel, make sure you subscribe, turn on
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the notification bell and leave a like to
show your support.
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Renko and Ichimoku are one of the many traditional
Japanese forms of analysis.
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Renko charts are an overlooked way of analyzing
price data and charting markets.
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Renko charts eliminate the time component
of trading and only focus on the price itself.
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Potentially, Renko charts can filter out a
lot of the market noise and display the price
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in a much more organized way that is simpler
to interpret.
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Conventional candlestick charts generate a
new candlestick every hour, 4 hours, day,
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week or another time interval the trader chooses
as his period setting.
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Renko charts, on the other hand, are not time-based
and they donât use candlesticks, but âbricks.â
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A trader might set 1 Renko brick equal to
10 points which mean that the Renko chart
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will show a new brick every time price has
moved 10 points in one direction.
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For this strategy, weâll use 100 points
for one brick, because i want to eliminate
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the noise as much as possible.
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The second component of our strategy is the
Ichimoku indicator.
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An Ichimoku chart is a trend-following system
with an indicator similar to moving averages,
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which offers a unique perspective of support
and resistance.
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I donât like to plot all the components
of Ichimoku, because itâs messy and a quite
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confusing, so i only focus on the cloud and
on the lagging span.
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The lagging span allows us to visualize the
relationship between current and prior trends,
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as well as to spot potential trend reversals.
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When lagging span is above the current price,
this indicates that current prices are higher
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than previously, and indicates a bullish bias
⢠When lagging span is below the current
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price, this indicates that current prices
are lower than previously, suggesting a bearish
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bias
⢠When lagging span is near the current
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price, this indicates a trading range
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The most important component of Ichimoku is
the Kumo cloud, formed from 2 lines (span
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A and span B), which act as major areas of
dynamic support and resistance.
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Here are the main 4 rules we will apply later
in our strategy
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⢠the longer the price stays below/above
the Kumo cloud, the stronger the trend is(
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so for strong and reliable trends, we want
the price to stay above or below the cloud
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for long periods of time and we donât want
to see the price cutting through the cloud
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multiple times in a short period of time
⢠When the cloud is wide, the expected support
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or resistance is strong.
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⢠When the cloud is thin, the expected support/resistance
is weak.
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⢠The last important rule is that you should
never trade inside the Kumo cloud.
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So when the price trades inside the Kumo,
no matter if you anticipate that it will break
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in one direction, you must stay disciplined
and wait for the price to exit the cloud.
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Now, when we apply Renko charts with the Ichimoku
cloud, we get a very clean, clear and simple
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way to analyze markets.
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Applying the Ichimoku to the Renko charts
but only using the 2 components that we discussed,
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Ichimoku cloud and the lagging span, will
offer you a simple and effective trend following
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strategy.
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Here are the basic rules of this trading approach:
⢠We use the 100 Renko brick to identify
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key support/resistance levels, to determine
the market trends and to place our stop-loss
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and take-profit targets
⢠We use Kumo cloud to determine the main
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trend
⢠When the price enters the Kumo cloud and
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breaks its upper wall upward, we have a bullish
trend
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⢠When the price enters the Kumo and breaks
its lower wall downward, we have a bearish
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trend)
⢠We can confirm our bias with lagging span,
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by following its position above or below the
Kumo cloud.
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The most reliable opportunities appear when
3 conditions are met simultaneously:
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For buy entries a new green Renko bar appears
above the Kumo could
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The Kumo cloud is green and wide
And the lagging span is above the Kumo cloud
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And for sell positions
A new red Renko bar appears below the Kumo
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could
The Kumo cloud is red and preferably wide
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And the lagging span is below the Kumo cloud
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So letâs analyze this chart.
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These are the perfect market conditions, with
green Renko bars above the green Ichimoku
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cloud, and the lagging span above the Kumo
cloud.
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Look how easy you spot the upward trend.
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Now, I donât know about you, but when I
look at this chart, I have zero temptation
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to short the market.
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I can see so clearly that the trend is up,
with greens everywhere, and all I have to
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do is to go with the flow and enter long.
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There are many long opportunities here: a
possible buy around here, another one here,
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riskier because the market hasnât corrected
much, another one here, right about the previous
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support level, also confirmed by the lagging
span, another entry here, after the market
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found support from the previous breakout level,
and another one here after a small pullback.
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Remember that these are 100 point bricks,
so this is similar to a swing trading style.
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Here is another example.
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Do you buy here?
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No, because the Kumo cloud is red.
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So donât try to jump early in the trade.
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Do you buy here or here?
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Also, no.
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The cloud is still red.
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Here is when the first buy entry occurs.
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And yes, it was a losing trade, or a breakeven
trade at most, because the market formed another
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green brick and reversed.
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Another long appeared here, and this one was
a great one.
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Pay attention to the lagging span, which stayed
above the Kumo cloud, confirming our bias.
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We have another buy opportunity here, riskier
because the market didnât record a significant
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correction.
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I personally like to see a correction of at
least 2 or 3 bricks before re-entering.
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Here was another opportunity to buy, and the
market indeed continued its direction.
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Letâs see how a short signal works on a
tesla chart.
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So here, the downtrend begun, but the Kumo
was still green, so you might say we waited
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a little bit longer to join the downward move.
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Here is when we had the green light to short
the market and from now all you have to do
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is to manage the trend accordingly.
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We had another chance to reenter after a small
pullback, and another one here.
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Other 2 short trades appeared here and here.
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All this time, the lagging span remained below
the cloud and confirmed the trend.
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In real time, we have contradicting signals.
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So the price broke through the cloud, which
is still red, and the lagging span also made
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its way on the other side of the cloud.
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So, at the time being, no short here for now.
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Now, letâs see how we deal with choppy and
ranging markets.
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This looksâŚugly and not tradable.
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First, here is my most important rule.
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If I see the lagging span that is going up
and down though the cloud, I read this as
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market indecision, and I ignore the setup
and search for better entries.
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Pay attention at the lagging span here, it
broke up, broke down, stayed inside the cloud.
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Itâs all a big mess, and this is not what
a trend looks like.
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So, no trades here.
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Another clue is the Kumo cloud.
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I want to see consistent red, or consisted
green.
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I donât want to see the cloud changing its
color often.
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Look here, we have red, green, red, green.
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Clearly the market is in indecision and if
I see the cloud that is changing its color,
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then maybe itâs better not to trade this
market at all.
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Also, the Renko bars.
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Look how choppy the market seems.
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First the Renko bars are unable to record
higher highs or higher lows, or lower lows
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and lower highs, the ultimate definition of
a trend.
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But they also cut though the cloud easily.
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So no signs of dynamic support or resistance
from the cloud or from the Renko bars.
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So, pay attention to these filters because
they can make the difference between a bad
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trade and a good one.
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Now, if you found value and learned something
new, make sure you subscribe to our channel,
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turn on the notifications so you donât miss
future uploads and leave us a like to show
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your support.
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Until next time.
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