The MT5 Renko Indicator is a technical analysis tool that plots price movement using uniform “bricks” instead of time-based candles. Each brick represents a fixed price change—say 10 pips—and is added only when the market moves that amount. This approach smooths out noise from minor fluctuations, making trends easier to spot.
Traders often use it to identify clear support and resistance levels, monitor trend continuation, and detect reversals. Unlike standard charts where price moves continuously, Renko charts highlight decisive shifts, giving a visual edge in fast-moving markets.
For instance, on GBP/JPY 1-hour charts during London session overlaps, the Renko indicator might show a clean series of upward bricks, signaling a strong bullish trend while candlestick charts display constant wicks and conflicting signals.
How It Works
The core logic of the MT5 Renko Indicator is simple: a new brick forms only when the price moves by the specified box size. Traders set this brick size according to their strategy and the volatility of the instrument.
- Calculation: If the box size is 15 pips, a new brick appears only when price rises or falls by 15 pips from the last brick.
- Direction: An upward brick indicates bullish momentum, while a downward brick signals bearish movement.
- Trend Identification: Consecutive bricks in one direction suggest a strong trend; alternating bricks may indicate consolidation.
Here’s an example: On USD/CAD 30-minute charts, a 12-pip Renko box might generate five consecutive upward bricks during a breakout. That would give traders confidence to enter long positions while ignoring minor retracements that would trigger false signals on candlestick charts.
Practical Application
The MT5 Renko Indicator works across multiple timeframes and instruments. Traders often combine it with other tools like moving averages, RSI, or MACD for confirmation.
- Trend Following: Spot consecutive bricks forming in one direction before entering trades. On EUR/USD 1-hour charts, seven consecutive green bricks might indicate strong bullish momentum.
- Support & Resistance: Bricks help visualize zones where price repeatedly reverses. For example, a series of upward bricks repeatedly hitting a 1.1050 level signals resistance.
- Reversal Detection: Watch for the first brick in the opposite direction after a series of trend bricks—this can indicate a potential pullback.
Here’s the thing: during volatile NFP releases, Renko charts reduce chop, making it easier to spot real breakouts rather than reacting to every candlestick wick.
MT5 Renko Indicator Settings & Customization
Traders can tailor the Renko Indicator for different trading styles:
- Box Size: Smaller boxes (5-10 pips) produce more signals but can be noisy; larger boxes (15-30 pips) filter out noise but may delay entries.
- Timeframe: Renko charts can be applied to any timeframe. Shorter timeframes suit scalping strategies; higher timeframes help with swing trades.
- Combination Tools: Pairing with moving averages can provide trend confirmation; RSI can highlight overbought or oversold conditions alongside brick formations.
For example, using a 10-pip box on AUD/USD 15-minute charts with a 50-period EMA can give clear buy/sell signals when bricks close above or below the EMA.
Advantages vs. Limitations
Advantages
- Filters out minor fluctuations and noise.
- Highlights strong trends clearly.
- Visualizes support and resistance zones effectively.
- Simplifies decision-making during high-volatility events.
Limitations
- Does not show all market action; small movements are ignored.
- Can lag in extremely fast-moving markets if box size is too large.
- Works best when combined with other indicators for confirmation.
Compared to candlestick-based indicators, the Renko Indicator offers cleaner trend visualization. Unlike oscillators like RSI or MACD, it directly reflects price movement rather than momentum, making it more intuitive for entry/exit decisions.
How to Trade with MT5 Renko Indicator
Buy Entry
- Wait for consecutive upward bricks – Enter when 3-4 green bricks form in a row on EUR/USD 1-hour chart, confirming bullish momentum.
- Price closes above EMA – Only buy if Renko bricks close above the 50-period EMA on GBP/USD 4-hour chart, indicating trend alignment.
- Pullback to support – Look for a 1-2 brick retracement near previous support before entering, reducing risk of a fake-out.
- Breakout brick – Enter when price breaks a recent resistance level (e.g., 1.1050 on EUR/USD) with a new upward brick forming.
- RSI confirmation – Buy only if RSI (14) is above 50 but not over 70, confirming upward momentum without overbought conditions.
- Stop-loss below recent brick low – Place SL 5-10 pips below the last downward brick to manage risk.
- Avoid during news spikes – Skip entries during NFP or major news if volatility exceeds 50 pips in 30 minutes, as bricks may give false signals.
- Position size check – Risk 1-2% of account per trade, adjusting lot size according to brick size and timeframe.
Sell Entry
- Wait for consecutive downward bricks – Enter when 3-4 red bricks form on GBP/USD 1-hour chart, signaling strong bearish pressure.
- Price closes below EMA – Only sell if Renko bricks close below the 50-period EMA on EUR/USD 4-hour chart, confirming downward trend.
- Pullback to resistance – Wait for 1-2 brick retracement near prior resistance before shorting to avoid chasing the move.
- Breakdown brick – Sell when price breaks a recent support level (e.g., 1.0980 on EUR/USD) with a new red brick.
- RSI confirmation – Sell only if RSI (14) is below 50 but not under 30, confirming bearish momentum without oversold risk.
- Stop-loss above recent brick high – Place SL 5-10 pips above last upward brick to limit potential loss.
- Avoid in low liquidity – Do not take signals during Asian session thin hours on GBP/USD, as bricks can whipsaw.
- Position size management – Keep risk per trade at 1-2% of account, adjusting lot size based on brick value.
Conclusion
The MT5 Renko Indicator is a valuable tool for traders seeking clarity amidst market noise. Key takeaways include:
- Bricks filter minor fluctuations, showing clear trends and reversals.
- Adjustable box size and timeframe allow customization for scalping or swing strategies.
- Works well with complementary indicators like EMA, RSI, or MACD for confirmation.
- Provides a practical visual approach to support and resistance zones, reducing emotional trading decisions.
That said, trading forex carries substantial risk. No indicator guarantees profits, and careful risk management is essential. Using the Renko Indicator as part of a disciplined trading plan can help traders focus on meaningful price movements, improving timing and confidence in their trades.
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