Renko Price Envelope Reversal Trade Setup

I want to continue talking about our renko price envelope reverse trade setup, and the midline reject entry timing.

And let’s also remember the question I asked at the end of the previous renko trade setup video:  does a partial brick after the midline reject typically complete as the same color?

This is important to continue to study, because in the event that most of these renko bricks do complete, we will be able to consistently get a better entry price for our trades.

Renko Midline Reject Setup Pattern

You are again looking at the chart segments that we were discussing for trade entry.  You can see that there were 5 trades with a mix for which brick the trade was entered.

We are going to look at the chart these segments come from and the setup components for the trades that were done.  But let’s first specify some names for the bricks related to the midline reject setup pattern.

• A sell will have a red-green-red brick pattern, with a red brick synching with the price envelope reverse to red dots on top
  • The green brick is the reject brick
  • The 2^nd red brick is the reversal brick
  • A buy will have a green-red-green brick pattern, with a green brick synching with the price envelope reverse to green dots on the bottom
    • The red brick is the reject brick
    • The 2^nd green brick is the reversal brick

Renko Emini Russell Trading Chart

So, our issue is do we enter on the reversal brick after it begins, or do we wait for that brick to complete and become another brick of the reversal color?

Here is the trading chart the segments came from; you are looking at a .45 brick renko emini russell trading chart from 12/12

• Yellow dot1 is the opening trade
• The sell swing from yellow dot5 ends at 11:23ct

You can also see my notes at the top of the chart:

• Should trade2 and trade3 have been done – and I am especially referring to a trade entry after the renko reversal brick completed
• Does the brick location give a better entry – and here I am referring to the question about entering during an uncompleted reversal brick –vs- waiting for that brick to complete and the next brick to begin

And let’s also remember our question about whether most reversal bricks complete

• For all 5 trades on this chart, they could have been entered during an uncompleted reversal brick without issue – thus giving the better entry price
• As a guideline, let’s think in terms of entering a trade during an uncompleted reversal brick, after a move of around half the brick size – we do have to synch with real price, since the emini russell price moves are .1
  • Since these are .45 bricks, let’s think of an entry fill after a .3 move – the point is to not enter immediately when the color first shows a change
  • And then let’s think of an entry after the brick completes and the next brick begins of .2
  • So, for this discussion we will just say that the entry fill price difference is .4

In this context, trade 2 and 3 never should have been

• Trade2 is done into the left 2 blue squares as shift line resistance – with only around .7 profit room
  • But if the trade had been entered on the previous brick the profit room would be 1.10
  • Trade3 is done into the shift line double top – with again .7 –vs- 1.10 profit room
  • In hindsight, both trades should have been done in the reversal brick, or not at all
    • Especially yellow dot3, because that gives profit room to resistance
    • And really, yellow dot 2 can be read as a range breakout setup if it is viewed as a triple top breakout

The remaining 3 trades have clear entries inside the renko reversal brick, because those entries are all into triple breaks.

And when all 5 of these renko midline reject trades are considered based on the setup pattern, there really is no reason not to enter during the reversal bar.

So, how does this fit with the comment I made in the previous video – when in doubt, enter the trade after the reversal brick completes and the new brick begins?

• Base the decision on the trade setup breakout potential and avoid trading into a consolidation breakout – because that is a market condition that very often holds
  • This was a primary focus in the renko chart trading during consolidation video
• Don’t enter the trade on the reversal bar as soon as it begins, meaning as soon as you see some color change
  • Like discussed earlier, give the brick some time to establish and become around half complete – that will still give a trade entry into the break, like we have entered trades on tick charts