How to use the Renko Bars MT4 Indicator to Enter and Exit Positions

The Renko Bars MT4 Indicator is a powerful Forex price reversal strategy which is based on price reversal at extreme areas. Renko charts are typically concerned with price movements without factoring in time or volume. The bricks that are placed on the candlesticks to represent the Renko price movement only appear once the high or low of the previous brick has been surpassed.

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The Renko Bars MT4 Indicator displays the bricks on the candle by means of colour-coding. Red bricks are used to represent a downtrend while white bricks represent an uptrend. Therefore, the Renko Bars MT4 indicator is used to trade price reversals, which occur when the bricks change colour.

Renko Bars MT4 Indicator Strategy and Trading Rules

The Renko Bars MT4 indicator performs a colour change on the bricks when the trend changes. So it is left for the trader to determine how to take advantage of these trend changes. Trend changes could be in the form of reversals, breakouts or retracement/continuation price patterns. Once the Renko bricks have changed to a particular colour and the trend is on, the trade can be taken and left open until the colour of the Renko bricks change once more.

For the long and short entries we will demonstrate in this article, we use the Renko bars in two different ways: a retracement-continuation as well as a breakout pattern.

Renko Bars MT4 Indicator Long Trade Entry Rules

In this situation, we use the Fibonacci retracement indicator as well as the Stochastics to measure the price continuation point for the Renko bars following a retracement. The Stochastics should be oversold when a Renko bar is at a Fibo retracement point. The long trade entry signal occurs when the following is seen on the charts:

• The Renko Bars MT4 indicator shows white bars.
• The lows of the Renko bars are located at a Fibo retracement level on which the Stochastics is oversold.
• The long trade entry is made when the next candle opens. The chart example is shown below.

Here, there is an uptrend followed by a short retracement. The Fibo level to which a white Renko bar retraces to when the Stochastics is oversold is the BUY area. 

Stop Loss and Take Profit Settings

The stop loss is set a few pips below the Fibo level where the trade entry occurs. The Take Profit point should be set at a price area which coincides with the Renko Bars changing colour to red.

Renko Bars MT4 Indicator Short Trade Entry Rules

For the Short trade, we have a situation where we will be trading a price breakout. A support level has been identified and the Renko bars have changed colour to red, which means that the market bias is for a downtrend to dominate. So how is this traded?

• The Renko Bars MT4 indicator shows red Renko bars after price action for the preceding candles consistently bounces off a support line.
• The Renko bars then break below the support line and close below it.
• Allow a retracement back up to the broken support which will not act as a resistance, then initiate the short trade entry when the next Renko candle opens. The chart example is shown below.

In this chart, we can see the trend line downside break by the red Renko bars. This is a signal to sell.

Stop Loss and Take Profit Settings

The stop loss is set a few pips above the trend line which acted previously as a support but is now acting as a resistance to price action. The trade should have commenced before the stop loss is set. The Take Profit point is set at an area where the red Renko Bars change colour back to white, which indicates that the market bias is changing to a bullish one.

Precautions when trading with the Renko Bars MT4 Indicator

It is very essential that the trader does not just enter the trade carelessly. Entries should therefore only be made not based on colour change of the Renko bars alone, but supported by other filters for technical analysis. This is how accuracy of the strategies traded with the Renko Bars MT4 indicator will be increased.

Renko Bars MT4 Indicator – Recommended Time Frames

Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.

How to Trade with Renko Bars – Video Tutorial

How to trade with Renko Bars Video Tutorial

Renko Bars MT4 Indicator Download

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