Charts are essential in Forex trading. Forex tips blog you cannot trade Forex effectively without a chart. The most popular Forex charting style is the Japanese candlestick chart.
Some other types of charts that are regularly used by traders include the line chart and the bar chart. In this lesson, we will illustrate what a Renko chart is and provide some additional trading tips and strategies for incorporating it into your trading. What is a Forex Renko Chart ? A Renko chart is a specific type of graph for displaying price movements of a financial instrument.
These blocks can be bearish and bullish as in a standard bar or candlestick chart. The reason that a Renko chart has individual blocks of the same size is because a Renko chart does not take time into consideration. The Renko chart has a setting parameter, which specifies the pips taken into consideration for each block. This parameter usually comes with the default value of 10 pips on the Metatrader platform. In this manner, the creation of the next brick on a Renko chart takes an indefinite period of time.
The block could be formed in a second, a minute, a day or a week for example. What we do know, though, is that it will be exactly the number of pips specified within the Renko parameter that you set. The first graph is a Renko chart that illustrates the price action of the second graph, which is a Japanese candlestick chart. See that the Renko chart smoothes the general price action. This way all the activity on the chart is presented with a more trending inclination. This type of Renko chart takes into consideration every price action behavior.
Low name suggests, it includes the price action between the highest and the lowest point on the chart. Close range of the price action. Have you noticed that the Renko image example we showed above includes a few big candlewicks? This is so, because the chart only takes into consideration the Open and the Close of the different periods. In this manner, some of the price action is not included in the Renko blocks. Therefore, the ticks outside the Renko blocks are displayed with these candlewicks.
It might be a bit tricky in the beginning to open a Metatrader Renko chart. So, I wanted to take a moment to discuss how to do so. First, you should download the MQL4 file of the Renko chart indicator. When you do this, you should see your Renko file there. After you do this, another window will pop up on the chart. This is the settings window of the Renko indicator you have just dropped on the chart.
You may be thinking that nothing has changed, but on the top right corner of your chart you will see a text which gives you the Renko version you are using and a smiley face. Also, you will see in the upper left corner a text which tells you that you need to open a MT4 chart offline to make the tool work. This is what we will be doing now. You now have an open Renko chart on your Metatrader 4 platform. Any trader that has used Renko charting knows that it is very effective for gauging the price action of the instrument that you are watching.
Let’s take a deeper look into some of the advantages of the Renko chart in MT4. The Renko chart can clearly show the direction of the market. Since the chart basically smoothes the price action, we almost always have a present trend in front of us. On the image above you see the different price swings on the Renko chart. Notice that there are no consolidations.
There are smaller and bigger trends, but there are no overlapping ranges. The Renko chart is very effective for identifying support and resistance levels correctly. Since the price action of the Renko chart contains the price action of a pre-specified pip movement, support and resistance levels can be very clearly displayed. Below you will see an image which shows four levels on the chart. Notice that after the price interacts with each of them, we see the creation of a new directional move. The red circles on the chart show the moments when the Renko bars break an important level.