Renko bar charts were created by the Japanese, as were candlestick charts, sushi, and very reliable cars. While candlestick charts show price movement within a specific period of time, Renko bars completely ignore time and only record price movement. This filters out a ton of market noise and really cleans up the charts because moves smaller than your bars are simply not recorded.
If price moves up a minimum of X pips, it creates a new Bullish bar. If price moves down X pips, it creates a bearish bar. To create a reversal bar, the most common setting is to require a move DOUBLE the size of the previous bar that was in the opposite direction. This helps prevent false reverse signals so you can hold a position in a trend longer. Renko bars have an uncanny ability to create order out of chaotic conditions and the larger your bars, the more it cleans up the charts.
1-Hour Candlestick Chart
25-pip RENKO Bar Chart
2. A 1-hour chart will open by default so click M1 at the top of your chart to get 1 minute candlesticks. NOTE: To get the most 1-minute candlesticks on your chart, click on the chart then press and hold down the "Home" key on your keyboard. You should be able to load 2-3 months of 1-minute data, depending on your broker. In Step #15 below, I'll show you how to download up to 10 years of 1 minute data.
4. In the Common tab, use these settings for both Live Trading and Back-Testing.
6. Optional: You can save these settings by clicking SAVE in the previous step. The window below will appear. Name the settings based on the size Renko bars and whether it's for Backtesting or Live Trading. You can see in my screenshot below that I have settings for many different sized bars. Some are for back-testing and I normally enable Tails for live trading. Saving these settings makes it quick & easy to load the appropriate settings in the future.
After your settings are saved, click OK on the previous window to build your Renko chart.
RENKO BACKTESTING TIP
13. To backtest your EA on a Renko chart, first create a Renko chart using a standard time frame (see step 5b above) then open that offline chart.
Then attach the EA to the Renko chart (click and drag it onto the chart from the Navigator), right click on the chart and choose "Expert Advisors > Strategy Tester" from the popups. It will then open the Strategy Tester with the EA already loaded on the appropriate offline Renko chart that you can backtest. If you skip this step and select the EA and time frame from within the Strategy Tester, it will choose the online version of your renko chart by default, which would be a normal candlestick chart so DO NOT SKIP THIS STEP FOR BACKTESTING!
NOTE: You should consider disconnecting your PC from the internet immediately after opening your offline Renko chart for backtesting. Otherwise, MT4 could begin to update the data and convert your Renko bars to standard candlesticks. This is because Renko charts for backtesting run on supported time frames and the MT4 platform doesn't know the difference between a Renko Chart and a candlestick chart when they use the same time frame. It identifies the renko bars as errors in the price feed and attempts to correct them.
This does NOT occur during live trading because we use non-standard time frames for live trading.