The Renko Scalping Strategy is a high-frequency, short-term trading method designed to capture small price movements in the market. By using Renko charts, which filter out market noise, scalpers can focus on significant price movements, making it easier to identify profitable trade opportunities. This strategy works particularly well in liquid markets where small price movements occur frequently, and traders are looking to exploit these small gains within short time frames.

Why the Renko Scalping Strategy Works

• Noise Reduction: Renko charts remove minor price fluctuations, allowing traders to focus on significant price movements and trends. This helps scalpers spot clear entry points without being distracted by short-term market noise.
• Quick Profits: Scalping is about making a large number of small profits. With Renko charts, scalpers can enter and exit trades more frequently, taking advantage of short-term price swings.
• Clear Entry and Exit Points: The simplicity of Renko charts makes it easier to spot trends, breakouts, and reversals, leading to clear entry and exit points.
• Trend-Following Advantage: Renko charts help traders quickly identify trend changes or consolidation periods, making it easier to enter trades that align with the market direction.

What are Renko Charts?

Renko charts are a type of chart that focuses on price movement, rather than time. Each Renko brick represents a fixed amount of price movement (known as the box size). A new Renko brick is only created when the price moves the specified amount. This design removes minor price fluctuations and provides a clearer picture of the market’s trend and price action.

Renko charts are ideal for scalpers who are looking for quick trades based on significant price movements and trends. The filtering of noise helps reduce false signals and gives scalpers a clearer picture of market conditions.

How the Renko Scalping Strategy Works

The Renko Scalping Strategy is designed for traders looking to make quick entries and exits within the span of a few minutes to an hour. Here’s how it works:

1. Identify the Trend with Renko Charts

Start by identifying the overall trend using Renko charts. Renko charts make it easy to spot trends by filtering out noise and focusing purely on significant price movements. The trend is indicated by the direction of the Renko bricks.

• Bullish Trend: If Renko bricks are consistently forming upward, the market is in a bullish trend.
• Bearish Trend: If Renko bricks are consistently forming downward, the market is in a bearish trend.
• Neutral Market: If the Renko chart shows small bricks in both directions, this may indicate a neutral or consolidating market where price is moving sideways.

2. Set the Box Size for Scalping

The box size, or the Renko brick size, plays a critical role in scalping. A smaller box size allows for more sensitive price movements, while a larger box size filters out more noise and shows stronger trends.

• Small Box Size: A smaller box size (e.g., 5-10 pips for forex) is suitable for short-term scalping since it captures smaller price movements.
• Large Box Size: A larger box size (e.g., 20-50 pips) is suitable for medium-term scalping or trading slightly larger trends.

The optimal box size will depend on the market and asset you are trading, but smaller box sizes tend to work best for scalping strategies.

3. Use Price Action Patterns for Entry

After identifying the trend with Renko charts and setting the box size, look for price action patterns to confirm entry points. Scalpers typically look for quick breakouts or reversals at key price levels, such as support, resistance, or trendlines.

• Breakouts: Look for breakouts when price moves above resistance or below support. A new Renko brick breaking through a key level can signal a potential momentum-driven breakout.
• Reversals: Look for reversal patterns at key support or resistance levels, such as bullish engulfing or pin bar formations, which indicate a possible trend reversal.
• Trend Continuation: If the Renko chart is consistently forming upward bricks in a bullish trend or downward bricks in a bearish trend, enter in the direction of the trend after a pullback or consolidation.

4. Set Stop-Loss and Take-Profit Levels

Scalping is all about quick, precise entries and exits. After entering the trade, use stop-loss and take-profit levels to manage risk and lock in profits.

• Stop-Loss:
  • For long trades, place the stop-loss below the most recent swing low or a key support level.
  • For short trades, place the stop-loss above the most recent swing high or a key resistance level.
• Take-Profit:
  • For long trades, set the take-profit at the next resistance level or use a 1:2 risk-to-reward ratio.
  • For short trades, set the take-profit at the next support level or use a 1:2 risk-to-reward ratio.

Since scalping aims for small price moves, the take-profit is typically set at short, predetermined levels to lock in profits before price reverses.

5. Risk Management and Trade Management

• Risk-to-Reward Ratio: Aim for a 1:2 or better risk-to-reward ratio. Given that scalping involves taking smaller profits, you must ensure that the potential reward justifies the risk on each trade.
• Position Sizing: Use proper position sizing to ensure that no more than 1-2% of your capital is at risk on each trade.
• Trailing Stop: Once the price moves in your favour, consider using a trailing stop to lock in profits while allowing the price to continue in the direction of the trend.
• Partial Profit-Taking: Consider taking partial profits as the price reaches key support or resistance levels, or when price shows signs of reversal.

Strategy Summary Table

Component	Details
Timeframe	Renko chart (based on price movement, not time)
Indicators	Price action, support/resistance levels
Entry Trigger	Breakouts, reversals, or trend continuation signals
Stop-Loss	Below/above recent swing low/high or key support/resistance
Take-Profit	Next support/resistance, small price moves
Best Use Case	Forex, stocks, commodities during high-volatility periods

Example: Bullish Renko Scalping Strategy on EUR/USD

1. Step 1: Identify the Trend with Renko Charts:
   • EUR/USD is in a bullish trend, confirmed by upward-moving Renko bricks.
2. Step 2: Confirm the Breakout or Reversal:
   • Price breaks above 1.1800 resistance level, confirming a bullish breakout. The Renko chart shows a new green brick, indicating continuation.
3. Step 3: Set Stop-Loss and Take-Profit:
   • Stop-loss is placed below 1.1750 (recent swing low).
   • Take-profit is set at 1.1850 (next resistance level).
4. Step 4: Exit the Trade:
   • The price moves up to 1.1850, hitting the resistance level, and the trader exits with a 2R profit.

Conclusion: Execute Precise Entries with the Renko Scalping Strategy

The Renko Scalping Strategy is a dynamic and effective method for capturing small price movements in the market. By using Renko charts to filter out noise and price action patterns to confirm entries, scalpers can execute precise, high-probability trades. This strategy works best in trending markets and during high volatility when price moves in a clear direction.

To learn more about how to implement the Renko Scalping Strategy, enrol in our Trading Courses at Traders MBA and improve your scalping skills to achieve consistent profits.