Renko Chart

Renko Price Chart

The Renko Chart is a type of chart that plots only specific pip movements, eliminating the impact of time.

📈 What is a Renko Chart?

Renko comes from the Japanese word "Renga," which means brick. This type of chart is valuable for swing trend traders and long-term trend traders but less suited for typical day traders. The Renko Chart plots only selected pip movements by eliminating the impact of time.

Renko vs Range Bars:

Both methods filter out noise and disregard time, but Range Bars display OHLC data for each range and reverse direction immediately when price moves the set range size. In contrast, Renko bricks build up directionally and require a price movement twice the brick size to trigger a reversal.

How Renko Bricks are Formed

• Brick Size: You set a fixed price increment (such as 10 pips, $0.50, or 5 points) which represents the minimum movement required to generate a new brick.
• Upward Brick (Bullish): Created when the price climbs at least one brick size above the top of the previous brick. These bricks are usually shown in white or green.
• Downward Brick (Bearish): Created when the price drops at least one brick size below the bottom of the previous brick. These bricks are commonly colored black or red.
• Key Rule: A new brick only appears after the price has moved the full brick size. Partial price changes do not produce partial bricks.
• Reversal Requirement: For the chart to reverse direction (for example, switching from upward to downward bricks), the price must move twice the brick size in the opposite direction (e.g., a 20-pip decline if the brick size is 10 pips).

Median or Mean Renko Charts

A Median Renko chart is similar to a regular Renko chart, except that each bar’s open is positioned at the midpoint of the previous bar rather than at its high or low.

⚙️ How a Renko Chart Works

Any price level plotted on a Renko Chart is based on a minimum pre-specified pip movement, regardless of time.

Setting the Brick (pip movement)

The smaller the pip size, the more movements will appear on a Renko Chart. Conversely, the larger the selected pip size, the fewer movements will be shown.

◙ Forex traders usually use bricks between 3 and 16 pips, though some may use bricks as large as 100 pips.

◙ Stock traders typically use bricks representing 1.0% of the stock’s price.

🛠 Renko Chart Features

These are the main features of Renko Charts:

(1) Renko Charts are similar to Range Charts and help with early identification of changes in overall market sentiment.

(2) A Renko Chart updates tick by tick.

(3) Renko Charts reduce market noise by filtering out minor price changes.

(4) A Renko bar can open and close in 1 hour or in 5 minutes, depending on price movement.

(5) Traders can select the minimum pip movement size that will be displayed on the chart.

(6) More bars are plotted during high-volatility days, and fewer bars during low-volatility days.

📌 What a Renko Chart Can Reveal

Renko charts are used for the early identification of changes in overall market sentiment and can:

1. Identify trends and reversals

2. Identify support and resistance levels

3. Generate long and short trading signals

🎯 Trading with Renko Charts

Renko Charts convert raw price data into a sequence of directional “bricks,” with each brick corresponding to a set price change. By removing time and filtering out minor fluctuations, they offer a clearer perspective on trends and reversals—making them perfect for trend-following approaches, but less effective for assessing volatility, volume, or exact timing.

• Forex traders can easily use Renko Charts on the NinjaTrader and TradeStation platforms, or on MetaTrader 4 by adding custom software.

◙ Renko Chart

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