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Understanding Renko

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    Understanding Renko

    I've just started looking at Renko charts.

    I admit upfront, it's very new to me.

    Maybe I'm missing a base concept, but just comparing a CL 12-14 5 tick chart to the 5 minute chart, the highs and lows on the two charts don't match. The Renko seems to be "missing" some price action.

    ie. the 11/7/2014 0850 bar in the 5 min shows a low of 78.35 but the renko for the same area shows a low of 78.39.

    Is the charting correct or am I just not understanding something?

    #2
    Hi EnsoTrader,

    Renko Bars are not intended to show you price action like a tick bar. Instead they show when a certain amount of gain or loss has been hit.

    From the help guide:
    Renko bars are built based solely on price movement with no regard to time or volume. Each bar is known as a "brick" and a brick is plotted as green when price is moving up and red when price is moving down. A new brick is plotted when price exceeds the high or low of the previous brick by a specified amount set as the Brick size.

    Below is a link to the help guide on Bar Types. Please see the section 'Understanding Renko bars'.
    http://www.ninjatrader.com/support/h.../bar_types.htm
    Chelsea B.NinjaTrader Customer Service

    Comment


      #3
      I've just started looking at Renko charts.

      I admit upfront, it's very new to me.

      Maybe I'm missing a base concept, but just comparing a CL 12-14 5 tick chart to the 5 minute chart, the highs and lows on the two charts don't match. The Renko seems to be "missing" some price action.

      ie. the 11/7/2014 0850 bar in the 5 min shows a low of 78.35 but the renko for the same area shows a low of 78.39.

      Is the charting correct or am I just not understanding something?
      Hi EnsoTrader

      Chelsea has given you great information there.

      There's been a lot of discussion in the forum about Renko bars, they have serious pros and serious cons.

      The essential thing is this: just say we're working with a 4 Renko (as you may well do in the ES).

      If there's an up bar, a new up bar will print when price has increased by 4 ticks, unless price has decreased by 8 ticks first, in which case, a new down bar will be printed.

      The morale of this story is: Renko bars reverse if and only if price has reversed by twice the bar length.

      When coding, only refer to Renko bar closes, as everything else is a 'hall of mirrors'.

      That said, they're great to enter trades with - but best not try to work trades with them, if you see what I mean!

      May I refer you to this thread:

      http://www.ninjatrader.com/support/f...ad.php?t=68224

      Comment


        #4
        Hey arbuthnot

        Thanks.

        I understood that the bars are time and volume independent, it was just a surprise that they didn't fully account for all price points.

        If I understand, given an ES 4tick Renko chart, then the market could move 10 ticks while only showing 1 brick. 4 ticks for the brick and 3 ticks above and/or below (4+3+3=10).

        Not quite what I was expecting. But that makes it easy to interpret now.

        Enso

        Comment


          #5
          Nice to hear from you, Enso.

          You've got it spot on about price can move 10 pts without a bar change on a 4 Renko.

          But this is the price you pay for the smoothness. As long as a trader understands why Renko is so smooth, as you do, then these charts can be peerless, esp. for price action: I can't emphasize this too much.

          Some conventional indicators are just about useless with Renko, but try drawing some trend lines.

          May I point you to the LineAlert indicator available for download in this forum, I believe, which is terrific with Renko. There are also ways of having trend lines drawn automatically.

          I always make sure I have my stop 2 Renko bar lengths behind the open.

          Comment

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