Which Renko Bars To Use With NinjaTrader 8 (For Reliable Backtest Reports)

With plethora of NinjaTrader Renko bars already available, one may question whether there’s a need for yet another version. The short answer to that is yes. For example, there are significant issues when applying existing NinjaTrader Renko bars with automated systems. They often generate inaccurate backtest results, which we discussed at length during our SharkWeek 2019 presentation:

Our SharkWeek 2019 presentation, discussing backtesting issues with Renko Bars

What Are Renko Bars?

Like many other bar types, the Renkos originate from Japan. They allow for displaying price action without taking into account time or the participation of traders. Standard Renko bars have a 1:2 ratio and plots a new bar in the direction of the trend when prices have made a move equivalent to the brick size. For a reversal bar a price move of twice the brick size is needed.

Therefore, a standard Renko bar (1:2) is comparable to a zig zag indicator with a minimum deviation of twice the brick size. Minor price moves inside the bricks that plot on the chart are effectively eliminated.

Below we see the YM contract with a brick size of 5. For a new trending bar we require 5 ticks whereas 10 ticks are needed for reversals. A typical Renko chart will therefore expand on trends whereas congestion areas are eliminated.

Backtestable Renko Bars
A standard renko brick size of 5 requires 5 ticks for a new trend bar and 10 ticks for reversals

Challenges With Renko Bars

The challenge with Renko bars is merging the visual appeal with the true price levels.  In particular, it is important to address the issue of true price action. When applying Renko bars to price based indicators, the OHLC (open, high, low, close) will not display correctly because the renko price levels reflect a preset grid defined by this bar type.

For example, the below chart illustrates what would happen if you do not use renko bars that reference the real price action. We see floating swing highs/lows based on real price action and not using these reference points create incorrect indicator plots.

Backtesting Renko Bars with true highs and lows
Renko bars with a ZigZag indicator set to a minimum deviation of twice the brick size

Another issue with NinjaTrader Renko bars is that the open is chosen for purely esthetical reasons. It does not reflect real price action and the open for reversal bars is modified in order to allow for a single brick size. The open is not real. Again, the open is chosen for purely esthetical reasons and do not reflect real price action.

This is a problem with NinjaTrader 8 because the fake open prices are used as the entry price for all market orders. This makes them unsuitable for backtesting of automated systems.

Reliable backtest reports for Renko Bars
The LizardRenkos separate underlying price action from the visual display.

Then there are Renko bars that plot most of the price action data correctly. However, many of them do not allow for setting dynamic trend reversal ratios. Finally, there are significant issues with synchronization of multi-bar series scripts with most available Renko bars. This is mainly caused by zerovolume fake bars and incorrect timestamps.

NinjaTrader Renko vs. LizardRenko

Below is a comparison that illustrate issues caused by Renko bars that do not distinguish between price action and visual display. It compares output from the Opening Range indicator with the default NinjaTrader Renko vs. LizardRenkos. Discrepancies are found in the Opening Range as well as in the Pre-Session high / low levels.

Renko Bars for use with price based indicators
NinjaTrader Renko vs. LizardRenko

The high/low levels returned by the NinjaTrader Renko bars are not based on true price action and plot inaccurate support / resistance levels. The same problem will arise by applying the NinjaTrader Renko bars to other session tools. The Range Projections, Pivots and Fib levels,  all available from our indicator library, will return inaccurate support / resistance levels.

The LizardRenkos make a distinction between true price action and visual display. It makes no difference whether you display the wicks or not. In other words the information contained within the bars is not influenced by the various display options. They will always return the correct high / low values.

The LizardRenko: Robust Design Meets Visual Appeal

The LizardRenkos address all of the above mentioned issues by exposing the true price action. Furthermore, it uses the real open as basis for order execution. Nonetheless, the LizardRenkos maintain the visual appeal that has made this bar type so popular. Specifically, they come with three chart styles and display modes:

Chart Styles

  • LizardBrick
  • Candlestic
  • UniBrick

Display Modes

  • Bricks
  • Wicks
  • Bar Open

The different LizardRenko bar types, chart styles and display modes are further explained in this video:

System Trading With Renko Bars

The LizardRenkos also address synchronization issues with multi bar series scripts. This is relevant for strategies that use multi time-frame, or multi instrument analysis. Almost all existing Renko bars will plot zero volume fake bars with incorrect timestamps in low liquidity scenarios. This scenario occurs when there’s a gap of more than 1 tick between the current close and the open of the next renko bar. Low liquidity scenarios will also arise when the renko bar closes above / below the preset grid defined for the trend / reversal requirement, i.e. skipping one of those levels.

The problem with zero volume fake bars is that you‘ll again get incorrect and misleading indicators plots. Even a simple Moving Average will return false values because there’ll be more bars than there should be.

The Renko Tools

Therefore, the LizardRenkos come with a Renko Tools indicator that can be used to visualize this issue. Specifically, illiquid market situations may be displayed via paintbars. Additionally the indicator comes with a sound alert that trigger when such a situation occurs. The Renko Tools also come with a public Series<bool> MarketLiquidity for access via indicators or strategies. This can then be used to exclude setups that occur in these illiquid market scenarios (overnight, regular open or during news releases).

The Renko Tools can also be used to display renko bar projection levels. It calculates the projected high and low for the next renko bar. These levels may then be used to enter stop orders before the new renko bar has actually closed. Effectively, that can contribute to reducing slippage costs. Furthermore, sound alerts can be activated and triggered when one of the projection levels is reached, thus closing the current renko bar. Finally, the tool comes with two public properties “ProjectedHigh” and “ProjectedLow“ for access via indicators or strategies.

Additional information on the RenkoTools indicator and how to call those values in Bloodhound from SharkIndicators are discussed in this video:

Conclusion

The LizardRenko bars have all the visual properties that have made this bar type so popular. However, the LizardRenkos make a distinction between price data and visual display. They are based on true price action and are therefore fully backtestable in all modes and settings.

To register for a free trial of the LizardRenko, please follow this link. For previous blog post and webinar presentations check out our blog.