Renkotraders.com

Difference between Median Renko and Regular Renko bars

Posted by on   |   12 Comments »

A new type of modified Renko bars, known as the Median or Mean Renko bars have been doing the rounds. While the Median (Mean) Renko bars might come across as a fancy new way to trade with Renko charts, truth is that there is not much of a difference when compared to the regular Renko bars. In this article, we’ll introduce some of the differences between the median or mean Renko and the traditional standard Renko charts so the reader will be able to make an informed choice and draw their own conclusions. The focus of this article is to simply identify the differences between the two.

Median (Mean) Renko bars vs. Traditional (or Regular) Renko bars

The Principle/Concept: Mean Renko bars work on the same principle of the traditional Renko bars, meaning that they (Median/Mean Renko bars) are also focused purely on price movements and not on time. The main difference between the median Renko bars and traditional Renko bars is based on the fact that the midpoint of price is used as a reversal rather than price moving ‘x’ pips from the previous closing Renko brick. An interesting point to observe here is that the opening price of the mean renko bar is a synthetic open (regardless of whether price falls to the mid point of the previous mean renko bar or not, the open is always plotted here)

(Learn: Types of Renko Charts)

Chart Comparison: The chart below gives an indication of how the Median Renko Bars look in comparison to the Regular Renko bars. In this comparison chart, we make use of the standard 20 Pip fixed size Renko. The chart on the left, shows the traditional Renko Chart, while the chart on the right is based on the Mean Renko with a 50% retracement, meaning that a new Median Renko brick is printed when price reverses from the 50% price point of the previous brick and closes 20 pips below or above.

(Learn: Renko ATR vs. Fixed Size)

Median Renko Chart v.s Traditional Renko Chart

Median Renko Chart v.s Traditional Renko Chart

Median Renko Price – How it works: With a Median Renko brick, the price point in focus is the midpoint of the previous Renko brick. For example, if Brick 1 opened at 1.1261 and closed at 1.1281 (a 20 pip brick), then a new Median Renko Brick is printed at the midpoint of the previous mean renko bar, which is 1.1271 and closes 20 pips lower (to 1.1251). The price point of 1.1271 forms the median price (Open + Close/2) of the previous Renko brick.

The main difference as we can understand with this explanation is that a traditional Renko brick is usually printed when price either rises above the previous higher close but with the mean renko bar, the open is synthetic. But is this synthetic open always the case? No. Sometimes price does pull back to, or below or close to the mid point of the previous mean renko bar.

Median Renko Charts – Smoother Indicator of price: The Median Renko charts visually depict a smoother price movement. The next chart below shows how price action is visibly smoother with the median Renko bars as compared to the traditional Renko bars. The Median Renko charts tend to have little pullbacks with opposite colored bricks and tend to show price trends in a more easily recognizable fashion. In a way, the Median Renko charts look quite similar to the Heiken Ashi candlesticks, which most traders are aware of.

Median Renko Chart: Smoother indicator of trends

Median Renko Chart: Smoother indicator of trends

Is Median (Mean) Renko Chart a better indicator than standard Renko Charts?

The next question that is probably on the reader’s mind is if the median Renko chart is a better indicator than the traditional Renko chart.

As you might have seen by now, there are some distinctive advantages of the median Renko chart over the traditional Renko chart. Hands down, trends are more visible and easy to determine with the median Renko chart. It therefore makes for a good indicator when it comes to markets that are moving in an established trend. Trend reversals are also easier to identify and in the very short term, the median Renko chart can add value.

Where to download the Median Renko Chart?

The Median Renko Chart is available for download from az-invest.eu. The plugin (indicator) is compatible with the latest version of MT4 and support ensures that the plugin is updated to any future updates or builds from MT4. The Median Renko chart is available for $35 or $50 (Standard or Pro versions). However, the Standard Version of the Median Renko chart should suffice if you do not want back testing and strategyquant support.

  • DN1002

    You talk about Median Renko bars, but never explain how to construct one! E.g, how do I determine the Open, High, Low and Close of the next bar?

    The term “Median Renko” doesn’t even make sense to someone who actually understands the concepts of “mean” and “median.”

    FYI, (Open + Close)/2 = Mean. Not Median. The median of the numbers 1,2,3,4,5 is 3, but the mean, aka average, is 7.5.

  • DN1002

    I just noticed that I said the mean of 1,2,3,4,5 is 7.5. It’s actually 3. lol Bad example.

    Forget that. Let’s focus on how Median Renko bars are constructed. You say,
    “For example, if Brick 1 opened at 1.12614 and closed at 1.12814 (a 20 pip brick), then a new Median Renko Brick is printed when price falls below 1.12714 and closes 20 pips lower (to 1.12514). The price point of 1.12714 forms the median price (Open + Close/2) of the previous Renko brick.”

    But what if the market never pulls back to the midpoint of the previous bar’s open and close, as tends to happen on an intraday chart in a strong trend? Do you still force the new bar’s open to be halfway between the previous bar’s open and close, even if the market doesn’t trade to that price?

    • Hi great questions.
      Yes, firstly it should be called Mean (or average) Renko and not Median Renko.
      The Open on the mean renko is a synthetic open. (I am writing up a very detailed description on the pricing structure in the Mean renko bars).
      Elaborating on your question, i’ll use the standard 4 decimals to make it easier to grasp.

      Brick 1 Open: 1.1261, Brick 1 Close: 1.1281 (20 Pip Mean Renko Bar)
      Brick 2: Will ‘automatically open’ at 1.1271 (the Mean of 1.1261 & 1.1281).
      Brick 2 will close when price moves 20 pips from 1.1271, which would be 1.1291.. in other words. Brick 2 Open: 1.1271, Brick 2 Close: 1.1291

      The open you see at 1.1271 is a synthetic open (meaning, the new mean renko brick opens here regardless of price pullingback or not).
      The wicks that you see in Mean renko is actually the real price action that you.

      I hope this clarifies, but if it doesn’t please wait as I write up the next post with detailed charts and comparisons between standard & mean renko chart.

      • Above article is also corrected. Thanks once again raising the questions!!

  • Forgive the newbie question, but I thought a traditional Renko chard didn’t have wicks?
    Looking at the wicks in the above traditional Renko chart, in several cases they seem to show more than the 20 pips that would be required to print a new brick, yet no new brick was charted. Why is this? I can understand that in the mean Renko this could happen as the new brick doesn’t necessarily show the actual open price, but why would this happen on the traditional Renko?

    • Yes, traditional/classic Renko doesn’t have any wicks. The wicks are useful (at least for me) in back testing any strategy or for that matter knowing where to put your stops. If you looked at a classic Renko without wicks and based your idea that you can sell at a reversal brick with stops just near or a few ticks above the reversal, chances are that you will be stopped out more often than expected. The chart that you see might look like the move was more than 20 pips (on a 20 pip box) but it’s not. On closer observation you will find 1 or 2 pips short of the 20 pip move.

      Wicks are a personal choice and you have the option to hide them if you want to.

      • Thanks. Looking at the chart where you have the first white brick making the first top, the wick below it is considerably longer than the brick. If the brick is 20 pips how can the wick be less than 20 pips? Clearly I’m missing something here, so again my apologies…

        • If you are referring to the bullish Renko that closed near 1.1376 with a lower wick, then you should know that for a reversal renko box to form, price needs to reverse 40 pips (two times the box size).

      • Thank you. Still trying to figure this all out…
        So looking at the top left chart, where it reaches the top, the first white brick has a long lower wick which appears to be hanging at least 30 pips below the bottom of the brick.
        To my mind, a wick that drops more than 20 pips should have printed another brick. Clearly I’m still not quite getting it!
        Whilst you grind your teeth at my lack of knowledge, I’d just like to say what a great site this is – I’m extremely thankful for all the information!

        • You just answered your own question. (Reversal boxes need to move 2 times the renko box size).

  • Edy Tanto

    Hi, Ranga. I’m trying to write a Mean Renko indicator for a trading platform. I have one question that I hope you can enlighten me. I wonder what does the wick in Mean Renko mean. I mean, why does it appear in some mean renko bricks but not in the others?

    Thank you very much


    Edit: spelling

    • Hi Edy,

      The wicks are formed when prices move half way and then reverse. Ex: If you have a 10 pip Mean Renko and the previous box closed at 1.1000 then the next box will close when price moves to 1.1005 (10 pips from the median of 1.1095). Now when price rises to 1.1008 and then closes bearish at 1.1095, then you will see a wick to 1.1008.

      This article should help explain it in bit more detail: http://renkotraders.com/renko-trading-basics/mean-renko-charts-plot-price/

Shares