Whipsaw is a term traders are always familiar with. What is whipsaw? It is a volatile situation in the market when you are trapped on the wrong front. You sold and the market moved up and you bought and the market moved down. So, worldwide traders are trying to minimize whipsaws and create a nearly foolproof system. Do you know you can minimize whipsaws in Nifty trading using Nifty Renko Charts?
Renko candles are not normal price candles. In fact in Renko charts new candles are not formed with time. They form a specific movement of price. So as in normal candlestick, we see 1-minute charts, 5 minutes charts, hourly charts etc we can set a price movement, suppose 10 points in Renko charts. That price movement is called the box size. So a 10 box size in Nifty Renko Charts means every 10 points of Nifty movement we will get a new Renko candle. So Renko bars are not dependant on the time, rather they are dependant on the price movement.
I use Nifty Renko Charts on the MetaTrader or MT4 platform, but you can use Renko charts on Zerodha Pi or Kite platform also. I choose a box size of 10 on Nifty and attach a Donchian Channel indicator on the chart. Now you can see that Donchian Channel starts creating upside or downside steps with the price movement. Till we are getting upside steps, it is an uptrend, and I look for a long opportunity in the dip of secondary indicators like Stochastics. On the other hand, once we start getting downward steps it means that the uptrend is over and you can look forward to shorting opportunity on the rallies of Stochastics.
Check the video above where I explained this strategy on Zerodha Kite platform. Do not use Renko candles for entry-exit, rather use overbought-oversold indicators for entry-exit. Definitely, keep some protective stops and exit on the basis of stochastics moving to the other extent OR use a trailing stop loss method. Your comments in this regard will be highly appreciated.
Indrajit is a professional blogger and trading system developer. Amibroker expert, Wordpress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.