The Three Not So Common Charts
There is, no one type of chart suits all, or that is ‘the best’ when it comes to trading, the only constant for everyone is the buying and selling that is taking place. How each person chooses to view this information graphically is where personal preference comes in. If you are one of those people who likes to think ‘out of the box’ and explore all possibilities then price based charts will be something worth looking at. Only some trading software packages will come with these less common types of chart and others, like MetaTrader 4, will have them as add-on programs.
The three most popular of the less common charts are:
Range Bar Chart
Renko Bar Chart
(and Median Renko)
Tick Bar Chart
All of the following options adopt the same type of display as the candlestick chart but are referred to as bars. They have a body to display the open and close and shadows, or wicks, to display the high and low. The difference is in how they open and close which is now based on price movement instead of time.
The range chart is based on user specified pip movement and has no time involved whatsoever. A range bar could open and close in 10 minutes or 1 hour, the only thing that matters is the size of the price movement between the high and the low. This means more bars during high volatility trading and less bars during lower volatility trading. A range bar will always have its close at either its high or its low and the next bar will always open outside of the high/low range of the previous bar. Let’s take a look at a 20 pip range bar chart to clarify.
As you can see they look like candles and all of the messages that candlesticks provide can still be considered, yet they put more emphasis on the horizontal areas of price that are proving to be active. Sideways market movements that can drag out on time based charts will be consolidated into less bars on these range bar charts.
The renko chart is also based on user specified pip movement and has no time involved. A renko bar could open and close in 10 minutes or 1 hour just like the range bar, the only thing that matters is the size of the price movement between the open and the close. Just like with the range bars this means that there will be more bars during high volatility trading and less bars during lower volatility trading. Another similarity the renko bar has with the range bar is that there will only ever be a shadow, or wick, on one side of the bar. It will always have its close at either its high or its low and the next bar will always open outside of the high/low range of the previous bar. Due to the more directional nature of the renko bar over the range bar the following image is a 10 pip renko bar chart, that is half the size of the previous range bar chart example yet they look very similar.
The first thing you will notice is that these bars no longer look like candlesticks as with the range bar chart. The one thing they do have in common with candlesticks is that they originate from Japan. Renko charts are extremely effective in putting emphasis on important horizontal areas of price, a.k.a support and resistance. Renko charts also consolidate sideways market movements into less bars than would be seen on a time based chart.
Median Renko Charts (Mean Renko)
A more recent addition to the renko family has been the median renko charts, or mean renko as called by some. Median renko is identical to the renko bar charts in their behavior but the initial transposing of the new bar’s open is in the middle of the previous bar (instead of at the high or low). You can look at the median renko chart as a middle ground between range and renko charts. They are a favorite here at ElectroFX when attempting to read the faster time frames that are very ‘noisy’ on a time based chart. The following image shows you a 16 pip median renko chart that provides a very similar amount of data to the above 10 pip renko chart and 20 pip range chart examples. This will allow you to compare the 3 and judge your own preference.
You will notice a very similar result to the renko chart with a slightly smoother look to it.
Tick charts are not time based and they are not based on a specified pip movement either. The tick chart is instead based on trading volume and a user specified amount of transactions, or incoming ticks. 233 ticks seems to be a favorite among day traders but this next example image is an 89 tick chart. Sticking to the Fibonacci sequence will narrow down you options slightly: 1,2,3,5,8,13,21,34,55,89,144,233.
With these tick charts they can be read exactly the same as normal time based candlestick charts. They are as close to time based as you can get but are more volume based than price based. Maybe they are in their own category but they are better suited on this page with the less common chart styles available.