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Using Renko Charts to Exploit Divergence Set Ups

This article combines the edge that comes from using the Renko charts and explores the idea on how to pick better entries (dips and rallies in a trend) staying within a trend following method. In this first article, we define the common issues faced with picking the dips and rallies and also explore the advantage of divergences that are a common occurrence in the markets and how we can exploit these simple points while analyzing the financial markets.

Trend Following – Buying dips and rallies

Renko charts undoubtedly offer a unique glimpse into trends compared to the more widely used line, bar or candlestick charts. The distinctive advantage comes from the fact that Renko charts focus entirely on price movements than time and therefore tends to be more reliable in terms of selling rallies in a downtrend or buying the dips in an uptrend.

Trend following strategies are often considered to be one of the safest ways to trade. Besides the fact that an established trend simply reflects the large positioning in the instrument or market, the chances of a trend based set up going wrong are much lesser than fading the trends.

But there comes a big problem. How do you know a dip has been formed and that price will rally or how can traders be convinced that a rally in a downtrend has completed the correction?

Traditional traders tend to use different approaches such as looking at candlestick patterns or support and resistance levels. But truth be told, this is largely a subjective matter and if one can put two or more traders to scrutinize the same chart, chances are that one can get to see a completely different set of support and resistance levels.

So how does one avoid these discrepancies and build a more objective approach to picking the dips and rallies?

Introducing divergence trading

Divergence trading is nothing new and if you have been around in the markets for a while, one would have often come across this term. Divergence, at its simplest definition is when price action fails to validate the move in relation to another instrument, or more commonly to an oscillator.

When price makes new highs but the oscillator fails to do so (and vice versa for lows) it presents a scenario of divergence which points to a possible correction to the trend (from which arises the dips and rallies).

The concept of divergence in itself is often a misunderstood factor, especially the regular bullish and bearish divergences. For traders who want to explore this further, Andrew Cardwell’s research on RSI and more importantly the points about divergences offers some unique and great insights which can help traders to clear their minds of any misconceptions commonly found in divergence.

Without going too much into detail, a regular bullish and bearish divergence merely point to a correction in the trend, which results in the dips (during an uptrend) and rallies (during a downtrend). When this divergence is complete, the prevailing trend resumes.

The benefit that comes with using Renko Charts to spot divergence is based on the pure structure and the construction of the Renko chart itself. Because price is the only variable on the chart, trends are clearer on the Renko chart than using the Candlestick/Line or OHLC Bar charts.

Psychology of the Forex Market

Perhaps most of you have heard, that among all traders, only around 5% actually succeed. And what, you’ll ask, happens to the other 95%?

The rest is part of the people that have been raised and grew up “like everyone else”. Most of us are “like everyone else”, but when it comes to market this is a sure way to lose money. Success in the trade world is not about a miraculous indicator or a fantastically profitable trading system. On the contrary, when it comes to trading, it’s all in your head and to become successful, you need to start with changing the way you think.

A man cannot command the market and the market, in general, cannot command the man. The same is true for the emotions and behaviour of people you meet. What’s left – the only thing you can actually control – is yourself and, of course, your money. The market is a game without a beginning or an end, and even without a middle part – your success depends on your own plan. As a trader, you don’t have a boss, who will create the plan for you and force you to make a report. As traders, we have to do all these things ourselves. What’s so great about the market is that it’s essentially an environment that gives you the freedom to express yourself and become whoever you want to become, provides you with endless possibilities… as well as risks. You need to know how to play the game right because players who forget about the psychological side of the Forex markets, are doomed to fail.

It’s common for most beginners to underestimate the difficulties, associated with trading, while at the same time overestimate their own abilities. Most of us are afraid of the things that bring us discomfort or physical or emotional suffering, including anxiety, stress, confusion, frustration and treachery. Naturally, we tend to instinctively seek a way out or avoid these experiences entirely: we create an internal protection from external influence. This can lead to a person, who denies or justifies what happens to them, interpreting the facts in a more favourable for themselves light – which, essentially, leads to distorting of these facts. As a result, you’ll be protected from the unpleasant experiences… but will perceive the world through your own prism.

What usually follows after such strategy is what’s commonly known as “forced awareness”. At a certain point, the trader will be shocked and even discouraged, unable to believe that something that was so powerful and successful, had come to naught at once. He’ll merge his regular deposits, send the purchased trading system to scrap, storm the bookshop for the next big encyclopedia on trading…

Fear is a fundamental part of every human being. The fear of losing or the fear of missing a chance are instrumental to the decision whether to sell or not. At the same time, fear is systematically excluded from the assessment of market information that would show if there are other possibilities or options. Fear can also be overwhelming, consuming to a point in which it renders the trader paralysed, unable to make a decision. Market fluctuations spread fear and self-doubt and the only way to resist them is to have two essential things: strong self-confidence and believe in your own abilities.

Greed has ruined thousands of traders. We all want and we want it now – and we, traders, in particular, want to achieve everything at once. This drive originates from what’s called natural selection law – to survive, you need to have access to as many resources, as possible. But when it comes to the market, greed is what kills your success, as it usually promotes impatience and recklessness.

Let’s return to those unsuccessful traders, these 95% who are “like everyone else” – and like everyone else, they suffer from fear and greed they cannot get under control. Forget about your fear and greed, when opening the trading terminal. To be successful, you first need to be clear-minded – start with a concise plan with daily work on the market and a constant analysis of your own actions. The truth is, you’ll never be able to get rid of these detrimental feelings completely, but you can get them under control and you can ensure they’re not influencing your decisions. Forget about your fear and greed – think, act and live like a pro. Never succumb to spontaneous ill-advised actions – they’ll hurt not only your finances but your psyche and inner peace, as well. And learn to accept losses – in this way, you’ll finally be free of your fear.

You can’t control the market, but you can control yourself. If one is to be successful, he can achieve that success even with the most primitive trading system. Begin working on yourself, identify your weaknesses, enhance your strengths. Learn how people act and think, and how their thoughts influence their behaviour. Self-educated yourself about the psychology of human behaviour as the markets are, ultimately, 90% psychology – they operate in the same way people do. And, as people, they’re also vulnerable to the effects of fear and greed.

What Is Neuro-Linguistic Programming

Neuro-Linguistic Programming™ (NLP™) is defined as the study of the structure of subjective experience and what can be calculated from that and is predicated upon the belief that all behaviour has structure. People such as Virginia Satir, Milton Erickson and Fritz Perls had amazing results with their clients. They were some of the people who’s linguistic and behavioural patterns Richard Bandler built formal models of. He then applied these models to his work.

Because these models are formal they also allow for prediction and calculation. Patterns that may not have been available in any of these people’s work could be calculated from the formal representations he had created. New techniques and models were (and still are being) developed.

Since the models that constitute NLP™ describe how the human brain functions they are used in order to teach them. NLP™is not a diagnostic tool. It can only be applied and can therefore only be taught experientially.

Well trained Neuro-Linguistic Programmers™ will always teach by installation, not by teaching technique after technique. Techniques outdate themselves too quickly to base the field of NLP™ on a set of techniques. It is based upon the attitude, the models and the skills which allow for constant generation of new techniques which are more effective and work faster.

Although many providers make certain courses prerequisite to the attendance of other courses, Dr. Bandler has no such prerequisites for any of his seminars. Learning does not come in levels. Once the underlying pattern, by which something can be learned has been taught, the material becomes not only easily accessible but a logical extension. For example, once somebody has learned how to read it no longer matters whether a book is five pages or two-hundred pages long. Similarly, once someone has been taught the spelling strategy it does not matter whether the word is two or five letters long, you just have to look at the picture. Each seminar is based upon different sets of knowledge. Therefore, it is not necessary to do them in any specific order.

Each seminar that Dr. Bandler teaches is different. Once someone has attended one practitioner course it does not mean that the practitioner material has been learned and that person should therefore go to a different course. You have to remember that the names and certificates are only names and certificates not the material nor the knowledge!

Neuro-Linguistic Programming™ was specifically created in order to allow us to do magic by creating new ways of understanding how verbal and non-verbal communication affect the human brain. As such it presents us all with the opportunity to not only communicate better with others, but also learn how to gain more control over what we considered to be automatic functions of our own neurology.

Why Social Media Marketing: Sharing Innovation

In today’s market, people’s spending is limited, budgets are tight but technology is faster than most people can keep up with. Even with little to spare, people still want the newest gadget, the newest technology and all the apps, accessories and connectivity that go with it. It becomes obvious who is behind the times, both in your circles and in the businesses you patronize (or used to). Because the economic times are rough, people want their spending to matter, to get them the newest and best for the lowest price. The price doesn’t even always have to be the lowest if the technology is clearly cutting edge. Consumers want it to be obvious that what they are getting is the most modern and hip or at least the most efficient and effective. Part of a successful marketing plan must make it plain to consumers that the product or service a business is offering is either the best or a classic that will always stand the test of time.

One of the best ways for a business to show that their products are current or classic is through a full scale social media marketing campaign. Social media marketing allows the business to post in real time and stay in the consumer consciousness. The fact that the consumer already follows or “likes” the business means they are interested in what they are selling and will be looking for their next big move, product or price-wise. Marketing with social media lets a business or organization keep their customers apprised of their progress, what they are working on and that it will be worth the wait. They can share proposed products or aspects of products and get feedback during the process.

Businesses can even let their friends or followers into testing groups so they are actually participating in product development. Social media marketing allows the customers to know the value of the wait for the perfect new release because they have already helped design and formulate the actual product. The business can even use social media to give away the finished product to random fans or contest winning followers, so that the flow of information to their targeted audience is real and objective, because it is being shared by a social media peer. Some successful businesses even allow customer input on social media to help name their new products. Social media marketing allows a business to prove themselves as innovative as well as interested in including their consumer base in their development of high quality products and services.