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Difference between using M1 and other timeframe data for Renko charts

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When trading with Renko charts, be it using the Tradingview charting platform or the MT4 trading platform, the conventional wisdom dictates on using the M1 chart time frame as the base time frame to build offline Renko charts. However, you can also use other base time frames and not just stick to the M1 time frame data.

Many traders have often asked the question as to why for example I use a 15-minute Renko chart when many use only M1 time frame. In this article you will learn what it means by using the different base time frame data to get an idea on how the Renko charts are formed. By the end of this article you should be able to use different base time frames on your own Renko chart analysis.

Before we begin, there are some terminologies that need to be cleared up.

What is the base chart or base time frame?

In specific reference to MT4 Renko charts, you basically need a chart time frame (usually M1). Once your drop your Renko building indicator or EA on this M1 chart you can then load up the offline chart.

On Tradingview, the process is pretty much the same, with the difference being that the Renko chart is populated automatically.

This M1 chart is what we call or refer to as the base chart.

Why use a base chart?

Renko charts are typically plotted using tick data. Tick data is a time independent chart (similar to Renko). One tick usually refers to 1 trade or a transaction. There are different versions of the tick chart. For example, some make use of a 300 tick chart, which means that after 300 trades, a new tick chart is plotted.

Bear in mind that M1, M5 and other time base charts are based on time and not on the tick or the trade.

Renko charts are traditionally plotted based on tick charts (1 tick) and can display the Renko blocks every time price closes “x” number of ticks.

The MT4 trading platform does not offer a standard tick chart, meaning that traders use the next best thing, which is the M1 chart time frame.

The basic flow is shown below:

By now it should be evident on the importance of the base chart from which the Renko charts are built. The next chart below shows a 1-minute base chart and the corresponding 10 pip offline Renko chart on MT4.

Now, if we switch the base chart from M1 to D1, you can obviously expect to see different data. The next chart shows the same 10 pip offline Renko chart but with daily close.

In the chart below you can see how the Renko chart bricks have changed slightly especially in terms of the wicks.

Now let’s take a look at Tradingview charts. The chart on the left shows a 5-minute base chart for Renko while the chart on the right uses a daily close. The Renko box size for the instrument is set to 10 pips for both.

The above chart shows how the base chart plays an important role. On the left side, you can see closed Renko boxes above 1.330 – 1.3400. This is because on the 5-minute chart, there are candles that closed above 1.3300 all the way through 1.3400. However, on the daily chart the Renko boxes are still blue (meaning that price hasn’t close above 1.3300 on the daily chart just as yet).

What does the different Renko base chart mean for trading?

Firstly, even before you ask, there is no right Renko base chart. Some prefer to use M1 data, while others prefer to use M15 or even H1. Think of the base chart as the chart time setting that you want to use. An M1 close is ideal for scalping, while a H1 or H4 close can be used to swing trade the Renko charts as it takes 60-minutes or 240-minutes for price to confirm a close above a certain level.

In most of the weekly Renko technical analysis that is posted on the website, a 10 pip Renko box is used either with a 5-minute or a 15-minute close. This simply infers that the closing prices are based on the 5-minute or 15-minute close which can show slightly different results, especially if you compare a 1-minute closing base chart for Renko to a daily closing base chart for Renko.

Let’s take a look again at a daily and 1-hour regular candlestick chart.

From the above you can see that while the daily chart on the left closed with a doji, meaning that price posted a high and low but closed nearly at the opening price, if you applied the Renko chart to the daily time frame, you would only see wicks (in MT4) and nothing at all on Tradingview’s Renko charts.

However, the 60-minute chart on the day shows that price closed at least 10 pips during the intra day which would show a couple of Renko bricks being formed.

So, a Renko trader using daily charts would have no Renko bricks, while the one using the 60-minute chart would see a few Renko bricks.

Questions on Renko time frame

Below are some questions received from other readers which I will respond here for the benefit of everyone else. You can also ask questions by commenting below.

May I ask you why you are not always using M1 as the feed for Renko charts like everyone else? You sometimes use H1 for example. Thanks.

The reason I use a different time frame is purely a matter of choice. You can build Renko charts based off M1, or you can also build Renko charts based off H1, H4 or any time frame of your choice. To put it another way, it is as simple as trading a regular M1 chart for scalping or trading a daily chart for swing trading.

  • Heinz Michael

    Hi Ranga,

    – Is there a MT4 EA available producing period-close Renko charts?
    – How does one trade these charts since whole blocks of candles
    can disappear (if I am not wrong)?
    – Where would one place the SL then for example?

    Thanks.

    • “Is there a MT4 EA available producing period-close Renko charts?”
      You can use the EA here: http://renkotraders.com/renko-trading-basics/renko-expert-advisor-mt4/
      Just add it to a TF and then open the offline chart. Once done, you can just switch between a base TF of your choice and you can see that the EA adjusts accordingly.

      “How does one trade these charts since whole blocks of candles can disappear (if I am not wrong)?”
      Once you select a TF you just stick to it. It will re-draw obviously when you switch the base TF.

      “Where would one place the SL then for example?”
      Answer same as before. You select a base TF, analyze and trade accordingly incl. entry/tp/sl. There is no point in changing the base TF after you have entered a trade.

      On another note, there is a whole different way to trade based on this base TF approach. I’m still trying to figure out how to put it in words, but so far as i’ve seen it offers big short term rewards for instruments like gold/oil where the tick value is higher than trading currencies for ex.

      Hope this answers your questions. Feel free to shoot back with more questions.

      • Heinz Michael

        So that EA can do both (period-close and price movement)?

        • Yes.

          • Heinz Michael

            Okay, I think I am beginning to understand.

            A Renko EA showing true price movement needs tick data. M1 as feed can be regarded as quasi-tick data. The higher the timeframe of the feeder the less true price movement shown. Is this correct?

            Regarding the picture above with the blue candles:

            Can all these disappear if a candle on D does not close above a certain price?

            And what if the brick size is for example 10 pips and a candle on D closes at 27 pips above?

            Thanks.

          • Yes, M1 data is the closest one can get to the tick data.
            “The higher the timeframe of the feeder, the less true price movement is shown. Is this correct?” It is subjective, as I mentioned you can trade from any base chart (From tick to D1 or even MN).

            “Can all these (candles) disappear if a candle on D does not close above a certain price?”
            When you switch from one TF to another, yes, the candles can disappear depending on where price is. For example if a daily candle had a doji where open = close, and if you used D1 as the base chart, you won’t have any Renko printed (maybe just the wicks showing the high and the low). But if you switch to M5 for ex, you can find that there will be Renko bricks printed as price would have made a close on an intaday basis.

            “And what if the brick size is for example 10 pips and a candle on D closes at 27 pips above”
            If D1 was the base chart, you would have two bullish 10 pip Renko bricks with the final remaining 7 pips still forming.

            Hope this helps and again feel free to clarify any further doubts.

          • Heinz Michael

            Okay, I guess the most important part is that these Tradingview Renko charts are correct and reflect reality because some of them look “too good to be true” to me (above picture with blue candles for example).

            By the way, FXCM Trading Station offers these features for free in demo accounts (all timeframes, automatic trading etc.). Maybe you know that already. If not, you could check it out.

            https://www.fxcm.com/platforms/trading-station/innovative-platform/

            The only problem I still have is that on MT4 I am not able to produce a Tradingview chart for the same timeframe (D1 for example). It looks totally different.

            Thanks.

          • There is actually a small difference between Tradingview and MT4 renko plugins, which is how the closing prices are calculated, therefore you see a bit of difference between those two. I’m currently testing a custom indicator that is an exact replica of Tradingview’s chart. Make sure to sign up to the mailing list as i’ll be sending out a beta testing invite for this new indicator.

          • Heinz Michael

            Okay, I will do that. A custom EA replicating Tradingview’s Renko charts would be great.

          • Heinz Michael

            Subscribing is not working for me (server not found). Can you please add my details manually?

          • Done. You should get a confirmation email shortly. Just validate your email address and its good to go.

          • Heinz Michael

            Regarding FXCM, here is more information about their Renko calculation: http://help.fxcm.com/us/TS-Desktop/38755873/What-are-Renko-Charts-Trading-Station.htm