RENKO ORIGINALS CHART

The different Renko chart bar types provide traders with the flexibility to view their trading charts in varying ways, depending on whether they are using:

(1) standard or classic Renko bars

(2) standard Renko bars with price wicks

(3) custom offset mean Renko bars with price wicks.

And this brings up the question:  Are the Renko bar charts with price wicks and custom mean bars, better for day trading than the standard Renko charts?

I day trade with the standard Renko chart bars, like the first chart below – all of these charts are NinjaTrader Renko charts.  As you can see, these Renko bars, or bricks as they are often referred to, show no other price information except for the size of the completed bar.

This is a 3 Renko bar chart, meaning that each of the bars is a size of 3 ticks or points.  In order to get a new Renko brick you would need the following:

• For a green or up brick, you would need 3 ticks of movement above the high of the previous brick
• For a red or down brick, you would need 3 ticks of movement below the low of the previous bricks

Custom Renko Chart Bar Type

The charts below show the custom Renko chart bar type – the first chart is the standard Renko bar with price wicks.  These price wicks will show prices below a completed green up brick or above a completed red down brick.

I spent many years day trading tick bar charts., and significant Renko prices and price action are an important component of our trading method.

Therefore, I wanted to evaluate whether I was missing something important [necessary] by not being able to see the additional price movement that isn’t part of the standard Renko chart bars.

Are these Renko bar price wicks important trading information, or are they chart noise that isn’t needed?

For instance, look at the green brick high of this chart.  That brick is actually 8 ticks, or 5 ticks more than then 3 Renko completed brick – how is it possible to have a 3 Renko chart but have 8 ticks of price movement?

The completed green bar is 3 ticks, and the price wick is 5 ticks.  This means that there were 2 ticks of price movement below the low of the previous green bar, but 3 ticks were necessary to get a completed red bar.  And when I look at this on the Renko chart it is meaningless to me, because the price wick low would never be considered to be trading price support.

How about the following red Renko bar, where the price wick is actually the high by 1 tick [and it could have been 2 ticks, without getting another completed green up bar]?  Does not seeing this price factor into or change how I would have traded this chart – no:

• The green brick high, which was the high of the day, would still be considered resistance – with the price wick high a test of that price
• Our trading method considers a significant price to be tested when it misses by a brick, hits at the brick high or low, or breaks by a brick
• The completed red brick would have given us a short price extreme reverse [the trade ‘triggered’ after the 5+ consecutive green bricks
• And these 2 ticks would not have been a stop for the short

Renko Trading Chart With Wick Bars

Here is the 3 Renko trading chart, with the wick bars and day trading method indicators.  I have marked yellow circles on the chart for 4 trades that were done – you will recognize:

(1) price envelope reverse

(2) mid-line reject ad-don

(3) price extreme reverse

(4) price envelope reverse ad-don.

The Renko chart with wicks does nothing to change our trade setups or location.  And it shouldn’t, this is the same 3 brick standard Renko chart that we typically use, with 3 ticks of price in each completed brick.

So, I might as well switch to the wick bar chart, in the event that the missed prices could be useful. However, I am feeling that the price wicks are adding ‘noise’ to the chart, especially for seeing the mid-line reject trade setup.

Look at the chart inset, where I added the 2 midline rejects, and also look at the main chart for similar patterns that occurred.  Can you see the setup patterns as clearly as you do with the standard Renko bars?

Maybe this is just a ‘visual thing’ I have, or the difference in what I have been trading for so many months, but I cannot see this very important trade setup as clearly using the Renko wick bars.

And for this reason, along with not thinking that the potential 2 ticks of price above or below a Renko support or resistance price will affect how I trade – I will continue to use the standard Renko chart bar type for 3 brick day trading.

That being said, the Renko wick bars may be very useful for bigger brick counts, where the missed prices are more significant.  For instance, what if you were trading an 8+ brick chart and position trading instead of day trading.  In this case, you could miss 7+ ticks of price on the standard chart, and that could be significant.

Renko Mean Bar Chart

This next chart is another custom Renko chart bar type, it is a mean Renko bar with price wicks.  Like the standard Renko bar, you need the fixed X number of ticks or points to get a new complete bar.

The big difference between a mean Renko bar and standard Renko bar is the open, which is actually a synthetic price based on the mean of the brick size being used as an offset.

This means that the opening price might not actually occur, it is simply the location [price] that the brick setting is added or subtracted to get a completed new bar.

I am showing you a 4 Renko mean bar chart, so the mean or offset for the open of the next bar is 2 ticks [or points]:

• If the last completed bar is green, then a consecutive green bar will open 2 ticks below the completed bar high
• If the last completed bar is red, then a reversal green bar will open 2 ticks above the completed bar low
• If the last completed bar, then a reversal red bar will open 2 ticks below the completed bar high
• If the last completed bar is red, then a consecutive red brick will open 2 ticks above the completed brick low

Another characteristic of these mean Renko chart bar types is the number of completed bars that you get compared to the standard Renko bar charts.

For instance, look at the 4 Renko mean chart and the 3 Renko standard charts above – you will see that the mean chart upswing is about the same number of bars as the whole standard chart.  I suppose this makes sense when you consider that you are getting a completed brick as a factor of the open price, which isn’t necessarily real.

Which Renko Chart Bar Type Is Better – Standard Or Mean?

More importantly than how the standard Renko chart and the mean Renko chart make completed bars is which of these chart types is better for trading?  At this time, I really don’t have a conclusive answer [yet] – and a better question might be, does the mean Renko chart bar type enhance or add to standard bar trading?

When I look at the Renko mean charts, I can see that extended moves [trends] are clearer, by eliminating some of the 1 brick reversal-resumptions. However, that could also mean that our 3 and 4 brick midline reject trades setups are also eliminated.

I will be studying this more, looking at the following:

• What do the mean charts look like at the time I take a trade on our Renko trading chart
• Are there additional Renko mean bar trade setups that could be added to our trading method
• Could the Renko mean bar charts be better used for position trading than day trading

But at this time, like the Renko wick bar charts, I also don’t plan to use Renko mean bar charts to replace our standard Renko chart setups.