Line Break Chart MT4
This indicator displays a Line Break chart in the main chart window.
To view the line break chart on its own, change the main chart window to display a Line Chart and then change the "Line chart" color to "None" in the F8 properties dialog. When scrolling, zooming in/out or changing the chart pair/timeframe, the indicator will resize the blocks on the next tick to fit the main chart viewing area.
Line Break charts were invented in Japan and are similar to Point & Figure and Renko charts. A Japanese trader described the three-line-break chart as a "more subtle form of point and figure charts where reversals are decided by the market and not by arbitrary rules." Line break charts ignore time and only change when closing prices move a certain amount. These charts show a series of vertical lines (or "blocks") of varying size (Renko uses a fixed block size). Green blocks (traditionally white) represent rising prices, red blocks (traditionally black) portray falling prices. Blocks continue in the same direction until a reversal is warranted.
A reversal occurs when the closing price exceeds the high or low of the prior "X" lines. Traditionally, 3 is used for "X"; this indicator allows you to use different amounts which gives you more flexibility in analyzing price action. There are numerous resources available on the WWW that describe how line break charts are constructed and how to use them.
Also (optionally) displayed is a "sequence frequency" histogram. The histogram shows the frequency distribution of the number of sequential highs and the number of sequential lows that have been generated over the past "X" direction changes. The histogram is a beneficial way of visualizing whether a pattern of consecutive highs or lows is dominant. The concept comes from the book "Sentiment Indicators" by Abe Cofnas.
- Do not use standard/custom indicators with line break chart, those indicators are calculated using standard MetaTrader 4 history data and are not relevant to line break charts. The date/timestamp at the bottom of chart is not a reflection of actual time for each block.
- MT4 Build 600 (or higher) is required.