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Published by: Vision Books Pvt. Ltd., 24 Feroze Gandhi Road, Lajpat Nagar 3, New Delhi 110024, Ph: 011-29836470 / 80; e-mail:visionbk@vsnl.com; www.visionbooksindia.com
Dear Investor,
Profitable Trading with Renko Charts
Imagine if a charting method could prevent
overtrading? Eliminate insignificant price action?
Make trends and tradeable patterns easier to identify?
Throw up clearly defined entry and exit signals?
Sounds too good to be true? But it is true. Among the
oldest and most popular Japanese charting system,
Renko charts offer all these unique benefits.
Vision Books is delighted to announce the
publication of a new, comprehensive book Profitable
Trading with Renko Charts (see pages 1-3). Written by
one of India's top Renko practitioners, and packed
with Indian market examples, it offers step by step
guidance from the basics to proven methods of Prashant Shah
“
T
analysis and trading. Come, profit from this If It doesn’t pay off soon,
”
HE FORMATION OF BRICKS IS A UNIQUE
immensely powerful system. forget it.
Mandar Jamsandekar has trained thousands to feature of Renko charts which no other
chart category possesses. Equally, different — Zurich Axioms
trade safely and profitably. His course book, Trading
and Technical Analysis Course (see page 8) presents combinations of bricks can help us in analysing both trends and setups. Over the
his proven methods and strategies and also introduces years, I have explored, researched and analysed numerous possible combinations and
his innovative Trade Selection Ready-Reckoner tool come up with a comprehensive list of unique Renko patterns. I have also tried to keep
which enables a trader to arrive at a clear go / no-go the patterns as objective as possible and kept their names simple so that they are easy
trading decision. to remember.
And, as always, this issue also highlights dozens of SWING BREAKOUT PATTERNS: Renko charts are basically swing charts. A series of
terrific books by top market experts to help you make bullish or bearish bricks represents a swing move, minus unnecessary noise. So when
profits in all market conditions! we see a series of bricks in a Renko chart, it means that the price has moved in a
particular direction without a correction of twice the brick size (see Figure 1).
Act today . . . ordering information is given A series of bricks in one dir ection is called a swing mo
direction movve. A series of bullish
on page 4. bricks indicates a bullish tr end and a series of bearish bricks captur
trend es a bearish
captures
tr end.
trend.
As discussed in Chapter 1, a brick reversal occurs only when the reversal criteria is
Kapil Malhotra met. Hence, the price in a daily Renko chart can progress in the same brick colour for
Publisher several days until the brick reversal criteria is met.
Swing breakouts are basic Renko chart patterns. Before we discuss them any further,
Detailed descriptions and contents of all books on let us objectively define swing highs and swing lows on Renko charts (see also Figure 2):
www.visionbooksindia.com (Continued on page 2)
PAGE 1 THE PROFESSIONAL INVESTOR MAY 2019
P RO F I TA B L E T R A D I N G W I T H R E N KO C H A RT S
When there is a brick reversal pattern from This basically implies that there will be a immediate previous swing high, it then triggers
a bullish brick to bearish, the high price of swing high or swing low at every brick reversal a bullish swing breakout. To complete a bullish
the previous bullish brick is a swing high. pattern. swing breakout, the price needs to print one
Correspondingly, when there is a flip over Figure 3 explains swing breakout formations. brick above the prior swing high.
from a bearish brick to a bullish one, the A swing high gets formed when a bearish Correspondingly, if the next series of bearish
low price of the most recent bearish brick is brick appears after a series of bullish bricks. If bricks goes below the low of an immediate
the swing low. the next series of bullish bricks goes above the previous swing low, and prints one brick below
it, the bearish swing breakout is then said to
have been triggered at that brick.
Please note that a breakout abo
breakout abovve — or
w — the immediate pr
below
belo evious swing
previous
high or swing lo w is necessar
low necessaryy to call it a
swing br eakout. Any swing piv
breakout. pivotot prior to
the most rrecent
ecent one is not consider
considereded as
swing br eakout.
breakout.
Figure 4 is a chart of BEML illustrating and
explaining bullish and bearish swing breakouts.
Figure 5 is a chart of Bajaj Auto showing
Figure 1: Series of bullish and bearish bricks illustrating bullish and bearish swings swing breakouts.
In R enko char
Renko ts, swing br
charts, eakouts can also
breakouts
be traded as a system bbyy themselv
themselves.es. Trading
a swing breakout is a price or trend following
method that doesn’t require prediction as
regards the direction of the trend. You buy
when a bullish swing breakout occurs with a
stop loss at the bearish swing breakout level. If
the stop loss gets triggered, you exit and reverse
by trading the bearish swing breakout with a
stop placed at the bullish swing breakout price
level. The method comes with clear and pre-
defined risk (stop loss) levels, breakout and
trend riding technique.
Price going above the previous swing high
has bullish implications. As noted, this swing
breakout technique comes with a pre-defined
Figure 2: Swing high and swing low on a Renko chart
rule for risk management, as follows.
A bullish swing breakout pattern fails if the
price falls one brick below the swing low.
A bearish swing breakout pattern will get
invalidated if the price goes one brick above
the swing high of the pattern (see Figure 6).
The failure levels highlighted in Figure 6 can
be used as stop loss when initiating trades. This
approach has the advantage of objectively
identifying the initial risk in the trade. If the
risk in a particular trade is unaffordable, you
can skip that trade and wait for the next suitable
opportunity. Or, you can adjust the position
size (explained later in the book) while
initiating the trade and add to the position later
if the initial stop loss is too wide.
Figure 3: A bullish swing breakout from an immediate previous swing high (left) and a bearish
swing breakout from an immediate previous swing low (right)
PAGE 2 THE PROFESSIONAL INVESTOR MAY 2019
P RO F I TA B L E T R A D I N G W I T H R E N KO C H A RT S
Figure 4: Bullish and bearish swing breakouts in the daily 1% brick value Renko chart of BEML
A, B, C, E, G and L are bullish swing breakouts while D, F, I, J, K and M are bearish swing breakout
patterns. Pattern H is a resistance level and N shows a double bottom support pattern.
` 889
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power of disciplined trade entries and trade
ONEY MANAGEMENT IS IMPORTANT FOR amount of investment per stock with the management strategies. Result: safe and
every market participant, irrespective of current market price of the stock. This will help profitable trading:
which profile you may fit into — day in spreading and balancing risk and reward How to use various technical analysis
trader, short term investor, positional trader or among the various stocks traded. Let’s see how. concepts and tools
investor. We all have limited amounts of money Suppose the two stocks you have decided
to put in the market. It could be `1 lakh for to trade are Suzlon and TCS. Suzlon was then
some, for others `5 lakh, `10 lakh, `1 crore or trading at `15 and TCS at `2,500.
`10 crore, but we all finally have a limit. This So, for example, when it comes to entering a
is hard earned money and we intend to grow it trade in Suzlon, I might buy 2,000 shares, but
further by investing it in the stock markets. when it comes to trading TCS I may buy only 5
Therefore, we need to respectfully take care of shares. Due to this fallacy, the value traded in
the money that we have with us. both the stocks is different. Along with the
Money management can be implemented in investment there is also a difference in the risk
two ways: and the return involved in both the trades.
Let’s look at a case where we have entered a
Maintaining a balance between risk and reward.
trade in both the stocks as shown in Table 1.
Giving priority to managing risk.
TCS gives a profit and Suzlon gives a loss. The
MAINTAINING A BALANCE BETWEEN RISK end result of the combined trade however
` 799
AND REWARD: Some stocks you trade or invest remains negative though your overall strike rate
How to pick the right stocks and timely
in might be trading at two digit prices, some at in the two trades was 50%. The reason for this trades using chart and pattern analysis
three, others at even more than three digit loss was the mismatch in investment in the two How to pre-determine tentative price and
prices. To maintain a balance between the risk trades executed. time targets for a trade
and reward involved in trades of differently To maintain a balance between the risk and Rules of money management, risk
priced stocks, it is important to follow and management and portfolio management
reward involved in all the stocks traded in your NEW: AIM Framework — the author's
implement money management. portfolio, you must ensure that you maintain disciplined trading approach for controlling
A simple rule for doing so is to decide your a balance in the investment amount in each. your emotions, panic and greed
investment per stock or per trade. The trade So irrespective of the stock prices, the NEW: Trade Selection Ready-Reckoner —
quantity will then be decided by dividing the the author's powerful trading tool that helps
investment amount in each trade or investment
you identify and manage high reward trades
Table 1
must remain the same. PLUS: Topic-wise quizzes and practice
Mismatched Trades The right way of maintaining a balance exercises to help you test your grasp of
each imprtant concept and topic and add to
Sr. Stock Price (`) Quantity Investment Risk of Reward of between the risk and rewards is by
your trading confidence
Name (` ) 2% (`) 2% (`) keeping the capital invested in all PLUS: 175+ large size charts for clearer
1 Suzlon 15 2,000 30,000 600 600 trades the same. This can be done understanding.
2 TCS 2,500 5 12,500 250 250 as shown in the example in Table 2. means that quantity should be decided based
This is the strategy to use when
Table 2 on a pre-defined risk amount per trade.
trading normal markets.
Risk Management by Uniform Investment in Each Trade By using this strategy you will be able to
Sr. Stock Investment Price Quantity Risk of Reward of GIVING PRIORITY TO keep the risk in control during choppy
Name (` ) (` ) 2% (`) 2% (`) MANAGING RISK : The second periods.
1 Suzlon 30,000 15 2,000 600 600 way of implementing risk For example, in Table 3, you can see that
2 TCS 30,000 2,500 12 600 600 management is by focussing the risk has been balanced among the
Table 3 exclusively on risk when you decide differently priced stocks that you trade. The
Risk Management by Balancing All Trades the quantity to be traded, or the stop loss remains at the correct level and what
Sr. Stock Total Price Stop Risk Quantity Invest- amount to be invested. This is the differs is the quantity based on the risk that is
Name Acceptable (`) Loss (`) ment (`) strategy to follow when there are acceptable to you.
Risk (`) plenty of market events or external [Excerpt from: Trading and Technical Analysis
events which can cause choppiness Course by Mandar Jamsandekar. Order by email to
1 Suzlon 600 15 13.50 1.50 400 6,000.00 visionbooks@gmail.com, or online at
2 TCS 600 2,500 2,050 450 1 2,500.00 in the stock price movements. This www.visionbooksindia.com]
Printed and published by Kapil Malhotra on behalf of Vision Books Pvt Ltd and printed at Ravindra Printing Press, 1590 Madarsa Road, Kashmere Gate, Delhi-110006
and published at 24 Feroze Gandhi Road, Lajpat Nagar-III, New Delhi-110024. Editor: Kapil Malhotra