Renko Charts Strategy for Binary Options
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Renko Charts Explained
Renko charts were originally invented in Japan. Renko stands for “bricks”. This is why Renko charts are also referred to as brick charts sometimes. They were initially designed for trading the stock and spot forex market. Renko charts display chart information differently than normal candlesticks do. This has provided traders with a new and fresh way of reading price charts, also known as technical analysis. Fundamental analysts will examine dividends, earnings, new products and do general research about the particular asset that they are looking to trade. Technical analysts, on the other hand, focus more on the employment of different price patterns and market trends to trade with. They believe that investors’ behaviors tend to repeat themselves. By recognizing these price patterns, they can utilize it to select trades with a higher probability. Today we will investigate how Renko Charts can be used in your Binary Options trading.

What Exactly Are Renko Charts

What if there was a way to minimizes the market noise? Well, you are in luck because this is exactly where Renko Charts come into play. Renko Charts uses the price of an asset to form bricks whereas normal charts use time to form candlesticks. In this regard, Renko Charts are quite similar to Point and Figure charts. These bricks that are formed move up or down in 45 degree angles. Every brick starts where the previous one closed. Normally bricks that go up are hollow while bricks that go down will be filled with a solid colour.

How Renko Charts Are Calculated

The Renko Chart bricks are all the exact same size. Traders can specify the size that they want them to be. Let’s say for example you choose 10 pips and you see a brick formed going up. In order for a new brick to be formed, the market has to move 10 pips higher than where it was when the brick opened. Now, an important point about Renko Charts are, for a brick to be formed in the opposite direction the market has to move 20 pips lower than your previous bar’s closing price. This is normally what confuses most traders so make sure you understand how it works.

How Can I Apply This To My Trading

When the market is choppy you might find that there are a few hours that pass before a new brick is created. This is one of the reasons why it is such a great tool to use. It filters out the market's noise and keeps you out of these messy conditions, potentially saving you from a bad trade. Renko charts are particularly good for spotting trends and you can clearly see the support and resistance levels that form. This being said you can also trade it purely on its own.

Metatrader indicator for Renko Charts

As always, MetaBinaryOptions is offering you a free Metatrader indicator for helping you apply this strategy.

Click here to download the indicator 100% free

This indicator will automatically plot Renko Charts on your chart. Be sure to put the file in the "MQL4/Experts" folder. "Allow DLL imports" in Tools/Options/Expert Advisors before using the indicator. After applying the indicator to your desired chart, you will have to go to File>Open Offline>select pairs name, M2(eg. "EUR/USD, M2") and click open to view chart.


Figure 1 – Renko Charts indicator

Can you see how clean the bottom chart looks compared to your time charts that you normally use? There is no messy price action and choppy markets which is every traders worst nightmare. We only needed to take one glance at the chart to see the support and resistance levels without even wondering about it.


Figure 2 – Renko Charts trading example

Now here comes the tricky part. It looks like it touched our levels to the pip at our arrows, but this does not mean that it dit not go through this point. Remember, a new brick will only be formed if the market moved 10 pips in the same direction. So in this example the market could have moved 9 pips above or below the lines and went back in the other direction. We would never know by looking at this chart. As you can see Renko Charts are great for spotting important levels but which levels should you trade? Well, like always, I would recommend you to use it with the help of price action and other indicators to add confluence to your trades.

Renko Charts Summary

Price is what we follow and what we trade, so we should be using a chart that allows us to do so, right? So why is it that not all traders are using charts based on price? Well firstly, we all have our own personal preferences and trading styles. Secondly, Binary Options is time-based so trading with price based charts could affect your profitability. Use it to identify trends and mark of important support and resistance levels. Trade these levels from a normal time-based chart if you want to make the most out of it.
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