Renko charts are a unique type of chart that plots price movement in uniform brick formations rather than using candles or bars. Unlike traditional charts that are time-based, Renko charts remove time and only plot price action. Each brick represents a fixed price movement of say 10 pips up or down. This filters out noise and enables traders to identify key support and resistance levels clearly.
Renko charts can be added to the popular MetaTrader 4 (MT4) trading platform using custom indicators. With some coding knowledge, traders can install Renko bricks on their MT4 charts for more effective technical analysis and trading. This comprehensive guide will explain what Renko charts are, their advantages, and provide a step-by-step tutorial on how to add Renko bricks to MT4 charts.
What are Renko Charts?
Renko charts display price action using bricks to represent fixed price movement rather than time-based candles or bars. For forex trading, each Renko brick is typically set to 10 pips.
- A new green (or white) brick is drawn when price moves up by 10 pips
- A new red (or black) brick is drawn when price moves down by 10 pips.
The size of the bricks is uniform as it only represents price movement. Time is not considered on a Renko chart.
- Bricks are always equal size e.g. 10 pips
- New bricks are drawn when price moves by brick size
- Charts are not time-based
- Removes noise and only plots key levels
- Bricks always close at High or Low
- No wicks like candles
- Clear Support and Resistance identification
Here is an example of a Renko chart with 10 pip bricks. When price moves up by 10 pips, a new green brick is drawn. A red brick is drawn when price declines by 10 pips. This filters out noise and enables traders to see key levels clearly.
Renko charts are useful for major support and resistance identification. Trends are also smoothed out into steady brick formations rather than choppy candles.
Advantages of Using Renko Charts
Here are some of the main benefits of using Renko charts for forex trading analysis:
- Noise Reduction – Minor price movements are filtered out so the key levels are clearly visible on the chart. This enables easier identification of support, resistance and trends compared to busy candlestick charts.
- Focus on Price Action – Renko charts remove the element of time and only plot price action. Traders can focus purely on levels and trends rather than time-based candle patterns.
- Easy Trend Identification – Trends form steady brick patterns which are easier to identify compared to time-based charts with wicks that cause confusion.
- Brick Size Flexibility – The brick size can be adjusted from 1 pip up to any amount based on the volatility of the currency pair. Slow pairs can use larger bricks.
- Clarity – With no wicks and all bricks closing at the high or low, support and resistance levels are clearly defined on Renko charts.
- Trading Signals – Simple but reliable trading signals are generated from Renko brick patterns. For example, three green bricks reversing into red bricks at resistance.
Overall, Renko charts provide high probability trading opportunities by smoothing out the price action and enabling traders to see the key levels clearly. Next let’s take a look at how to add Renko bricks to MT4 charts.
How to Add Renko Bricks in MT4
There are two main methods for adding Renko bricks to MT4 charts:
- Install a Custom Renko Indicator or EA
- Use the MT4 Chart Trading Object Method
The easiest option for most traders is to install an indicator or Expert Advisor (EA) that will automatically plot the Renko bricks. Here are the main steps:
Step 1) Download the Renko Indicator or EA
Search online for a “Renko Indicator MT4” or “Renko EA MT4”. There are free and paid versions available. Some good options include:
- FxCoding Renko EA (free)
- LazyBear Custom Indicators (free)
- EG Renko Charts EA (free)
Save the Renko .mq4 file to your computer. Be sure to select a reputable source and safe download.
Step 2) Copy the .mq4 file into MT4
Open your MT4 platform, then navigate to File > Open Data Folder > MQL4 > Indicators (or Experts).
Copy and paste the .mq4 file you downloaded into this folder.
Step 3) Restart MT4 and Add Chart Indicator
Close and restart the MT4 platform. The Renko indicator/EA will now be available to add to charts.
Right click on a currency pair and select Chart Window – Indicators. Select the Renko custom indicator and add it.
Step 4) Configure the Renko Brick Size
Most Renko indicators have settings that allow you to configure parameters like the brick size, chart colours etc. Set the Brick Size to your preferred pip value e.g. 10 pips per brick.
The indicator will now automatically plot Renko bricks on the chart based on price movement rather than time. You now have Renko charts on MT4!
Here is an example of the FxCoding Renko EA installed on an EURUSD chart. The brick size is set to 10 pips resulting in a smoothed out price action view.
How to Add Renko Bricks Manually in MT4
The second method is to manually add Renko bricks using the MT4 Object Creation Tool. Here are the steps:
Step 1) Open a Blank MT4 Chart
Open a currency pair and delete any existing indicators. Right click on the chart and select Objects List.
Step 2) Set Up the Object Creation Tool
The tool is located on the Charts toolbar on the top left. Select the Rectangle shape and set the color e.g. Lime for bull bricks.
Step 3) Draw the First Brick
Click once on the current High to set the top of the brick. Click again on the current Low to draw the first brick.
Step 4) Adjust and Add Bricks
Right click on the brick, Set for all and input size e.g. 10 pips. Now move the brick up or down to draw new bricks based on price movement.
Step 5) Change Brick Colors
For bear bricks, select a new color like Red. Draw down from a previous high to current low. Continue adding bricks.
This manual method allows you to fully customize your Renko charts. However, it can be time consuming. The indicator method is generally much easier unless you need specific customization.
Here is an example of manual Renko bricks using the object creation tool. Green bricks for bullish price movement and red for bearish.
How to Trade with Renko Charts
- Trend Confirmation – 3 or more bricks in one direction confirm a trend. Trade pullbacks with the trend.
- Breakouts – Price breaking key levels with strong brick momentum indicates high probability trades.
- Reversals – A signal occurs when price reverses from support/resistance shown by change in brick color.
- Retracements – Measure swing highs to lows. Entry near key Fibonacci retracements in direction of trend.
- Brick Filters – Ignore 1-2 brick retracements against trend. Wait for confirmation with more bricks.
This EURJPY chart shows a reversal signal with 3 red bear bricks breaking support, indicating a downtrend. A retracement entry could be taken on the next green brick after setting pending orders below key levels.
Here are some additional tips when trading with Renko charts:
- Combine Renko bricks with other indicators like the 200 MA, stochastics, RSI for confirmation.
- Focus on key chart levels, especially old support becoming new resistance and vice versa.
- Adjust the Renko brick size to suit different currency pairs and volatility conditions. Larger bricks for slow trends.
- Use a trading journal to record your Renko signals, entries, targets and review performance.
With the right combination of indicators and optimal brick size, Renko charts provide high probability trading opportunities. The simplicity can make them more effective than overly complex strategies.
Frequently Asked Questions
What are the main advantages of Renko charts?
The key advantages are noise reduction to focus on price action, easy trend and level identification, brick size flexibility, clarity, and clear trading signals.
How do Renko bricks compare to candlesticks?
Renko bricks filter out time and minor price movements to show key levels clearly. Candlesticks are time-based and include wicks that cause confusion.
What chart time frame works best for Renko bricks?
Shorter time frames like 5-15 minutes will give you more bricks to analyze trends and reversals. Longer time frames like 4H or Daily are good for major levels and reducing noise.
What is the best Renko brick size to set?
For most forex pairs, 10 pips or 0.00100 bricks are optimal. For volatile pairs like GBPJPY you may use 5 pips. For slow pairs like EURCHF try 15-20 pips per brick size.
Can indicators be used together with Renko charts?
Yes definitely. Oscillators like RSI, stochastics, MACD can confirm Renko trading signals. Trend indicators like Moving Averages can show directional bias.
How many Renko bricks are needed for a reliable signal?
As a general rule, 3 bricks in one direction indicates a trend. For reversals, 3-5 bricks hitting a level is optimum for a high probability trade setup.
Should I use Renko charts for forex scalping strategies?
For short-term scalping under 10 minutes, Renko bricks may be too slow to provide signals. Candlestick or range bars on a 1-5 minute chart are better suited for scalping.
Renko charts provide a valuable edge for forex traders by reducing noise and enabling focus on key price levels. By installing a custom Renko indicator or EA, traders can now utilize Renko bricks on the highly popular MT4 platform.
Some coding knowledge is required to add the bricks manually using the object tool. However, the indicator method provides an easy plug and play solution.
With the right brick size settings, support/resistance identification, trend analysis, reversals, retracement entries and high probability setups are much clearer using Renko bricks. Combining with other indicators provides further confirmation.
Overall, Renko charts are an invaluable tool in every trader’s analysis toolkit. This complete guide has shown how to add Renko bricks to Metatrader 4 charts and use them effectively for profitable forex trading.
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