Renko Charts
Price-based charting that filters noise to highlight clear trends.
What is a Renko Chart?
Renko charts are a price-based charting technique designed to filter out minor market fluctuations and emphasize significant price movements. Unlike time-based charts such as candlesticks, Renko charts ONLY change when price moves by a predefined amount, known as the 'brick size'.
Origin: Derived from the Japanese word 'renga', meaning brick. It ignores time and focuses purely on price direction.
How It Works
- 1.Choose a brick size (e.g., Rs 10 or 1%).
- 2.Green Brick: Added if price rises by brick size above previous top.
- 3.Red Brick: Added if price falls by brick size below previous bottom.
- 4.Ignore Time: Days can pass without a new brick if price is stagnant.
Bricks are always 45-degree visually, filtering lateral noise.
Pro Tip: Dynamic ATR Sizing
Instead of a fixed size, sophisticated traders use the Average True Range (ATR) to set brick size based on volatility. High volatility = Larger bricks (less noise). Low volatility = Smaller bricks.
Trend ID
Consecutive green/red bricks make trends obvious.
Reversals
Color change (Green to Red) signals potential trend shift.
Support/Resistance
Horizontal brick clusters show very clear levels.
Strengths
- Removes market noise.
- Highlights true trends clearly.
- Great for trailing stops.
Weaknesses
- Lags price (needs 2 bricks to reverse).
- Ignores volume and time.
- Brick size selection is critical.