Overview

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The Japanese developed Renko bar charts in an attempt to show price based upon a specified amount of movement in a single direction rather than reporting price based on a time schedule.

The InterChart Tools Renko bars are virtual bars that are able to generate trading signals and perform their calculations using the same methods as traditional Renko bars. Once a trading signal is generated by the Renko bar, both the trade and fill are correctly displayed on the open of the next bar of the base chart. These virtual Renko bars have advantages over traditional Renko bars that we will explain below.

Difference between Range and Renko Bars

In NeuroShell Trader a Range bar represents trading activity for the user-specified minimum price range. The high-low range of each bar will equal the specified range. Each bar is created by accumulating trades until the high-low range is reached. (For range bars, the price may move in either direction but a bar is created when the specified high-low range is reached.) The first trade to break outside of that range starts a new bar. Since price gaps are not filled with phantom bars, the high-low range of a bar can exceed the specified range when prices gap outside the range before a bar's price range criteria was met.

Renko Bars are only created when price has moved either up or down by the amount of the specified high-low range. This amount is referred to as the brick size. In all classic Renko charts, all bricks must be exactly the same size. Any data above or below a brick is ignored unless it is able to make another brick in the next column. No brick is started (opened) until it can be completed (closed). Therefore, the open of the next brick is not known until data indicates whether it will go higher or lower. For Renko bars, the change specified in the high-low range must be in the same direction, either up or down, before a new bar is formed.

As an example, let's look at an InterChart Tools Renko Bar indicator. We begin with a 0.25 Range Bar for the EMini S&P continuous futures contract, which is the base chart. The 0.25 value also represents the minimum tick size for that contract.

Range and Renko Bars with line red arrows

The IctRenko high values appear as pink squares on the S&P E-Mini range bar chart, while the IctRenko low values are shown as yellow squares. The orange line at location 1 denotes the size of an IctRenko bar with a bar multiplier of 3, or 3 times the size of the Virtual Tick Size parameter of 0.25. A new Renko bar is formed when there is a change in the same direction of 0.75 (or a change of $1.50 for a reversal of direction). Note that the next Renko bar after the orange bar does not appear until 27 range bars later (location 2) when the change in the Renko bar is again 0.75 in an upward direction. The next Renko bar appears 7 range bars later in a downward move of 0.75 at location 3. The red arrows between the virtual Renko bars indicate that there are no price gaps between IctRenko Bars.

Why InterChart Tools Renko Bars Differ from Traditional Renko Bars

The InterChart Tools Renko Bars include parameters that allow you to specify the number of ticks used to calculate the up part of the Renko bar as well as the number of ticks used to compute the down part. Since any bar's function is to absorb noise and rising price jitter is often different from falling price jitter, the IctRenko bars permit an asymmetrical definition to accommodate this. A Bar Size Multiplier gives you the option of setting the overall size of the bar once the up/down ratio has been configured. IctRenko bars are only displayed on the chart when price has moved either up or down by the number of virtual ticks specified in either the Ticks per Up Bar or Ticks per Down Bar multiplied by the Bar Size Multiplier.

NeuroShell Renko bars may, at the user's discretion, be controlled by the NeuroShell Trader optimizer to identify the optimal bar size and noise absorption for a given algorithm or security.