Renko Position Trading Chart For The Russell 2000 ETF

Let’s continue from our previous renko trading video, and discuss our renko base trades setups for position trading the Russell 2000 ETF – you are looking at the renko IWM ETF chart that I showed at the end of the video.

Note that this is a position trading chart covering 12/4 to 12/24, but that has nothing to do with the renko trade setups – our trading method strategies use the same base setups regardless of time frame or chart type.

The renko chart trade setup that we will be looking for is the price envelope reverse-midline reject with mex flow combination.

IWM Russell 2000 ETF Renko Trade Setup Review

Yellow dot1-Yellow dot2

• This is our renko base trade setup and with no left side price as resistance that we would be trading into, the entry timing is inside the reversal brick
  • Remember that in the green-red-green renko brick pattern – the red brick is the reject brick and the 2^nd green brick is the reversal brick
  • In the event that there was left-right price resistance or this pattern developed on the right side of consolidation – then the trade would be entered after the break and the start of a 2^nd green brick

Yellow dot3

• This is setup is a renko red-green-red midline reject sell setup
  • Note how the yellow line from the buy breakout shifts to support
  • I used this entry timing in the middle of the red reversal brick, because of the 2 purple square triple break – this pattern is a price failure break setup of the yellow line
  • If not for the triple break, the trade wouldn’t be entered until the yellow line breakout and the next red brick

Yellow dot4

• And another clear renko base setup – do you remember the emini russell renko day trading chart, where I first showed you this IWM ETF chart and how we could only find 1 renko trade setup for the whole day?
  • This trade also has some key additional price continuation setup components
  • Look at the left blue line and the synch with the 2 blue squares – and the mex flow extreme cross before the price envelop reverse
    • This is support being retest as resistance
    • But with the triple break as a price failure setup, the entry was inside the reversal brick
    • Like the previous sell, if there wasn’t the triple break pattern the trade would be entered after the price break and inside the next green brick
    • Look at how the blue line shifts to support and continues to hold, regardless of the 2 price envelope reversals
      • I don’t know if you read the yellow circle as a renko midline reject setup – I don’t because it wouldn’t have had mex flow
      • But even if this was as clear of a setup as the previous 3, I would not have taken the trade directly into price support – and in this case the trade was never exited

Yellow Circle2-Yellow dot5

• We talked about trading price envelope initial reversals
  • But yellow circle2 is the example I don’t think we should trade, because of it being a consolidation period between the sell breakout area as resistance and the blue-yellow line as support
  • There was a breakout and then the purple line breakout shifted to support
  • You can see the renko brick pattern that developed, including another midline reject-triple break combination
    • That setup was traded at yellow dot5 as a price continuation addon to yellow dot4 that had always been held
    • Is yellow circle3 another midline reject addon setup?
      • No, and you remember that the primary issue isn’t the red-red-green brick pattern, instead of a green-red-green brick pattern – it’s the momentum extreme and the mex cross
      • Yeah, it would have worked, but of course that’s no more than a hindsight observation – real time there is no trade setup

That ends this trading video and a discussion of renko base trade setups – remember that we are talking about the IWM ETF position chart covering a 20 day period.

The ability to use the same setups on the different underlyings and chart types and/or time frames that we may choose to trade is an important to our trading method strategies.

We will continue to discuss this IWM renko chart in the next trading video and talk about the related option trades, along with adding another ETF to start developing an ETF portfolio.