What is a Renko chart?

A Renko chart is a type of financial chart used in technical analysis that focuses on price movements while filtering out minor price fluctuations and noise. Unlike traditional candlestick or bar charts, which are time-based, Renko charts are purely based on price movement.

Key Features of Renko Charts:

1. 

   Brick Construction:

• Renko charts consist of "bricks" (or blocks) that are either bullish (typically white or green) or bearish (typically black or red).

• A new brick forms only when the price moves by a predefined amount (the "brick size").

2. No Time Axis:

• Time is not considered in Renko charts; bricks only form when the price meets the required movement threshold.

3. Trend-Focused:

• Since small price movements are ignored, Renko charts emphasize trends and make it easier to identify support/resistance levels.

How Renko Bricks Are Formed:

• Upward Brick (Bullish): Forms when the price rises by the brick size above the previous brick's high.

• Downward Brick (Bearish): Forms when the price falls by the brick size below the previous brick's low.

• If the price doesn’t move enough to form a new brick, no new bricks are drawn.

Example:

• If the brick size is set to $10:

• If the last brick closed at $100, a new green brick will form at $110.

• If the price drops to $90, a new red brick will form.

Advantages of Renko Charts:

✔ Reduces noise by filtering minor price changes.
✔ Makes trends clearer and easier to follow.
✔ Simplifies support/resistance identification.

Disadvantages of Renko Charts:

✖ Lacks time information (no intraday precision).
✖ May lag since bricks only form after a fixed price movement.
✖ Brick size selection is crucial—too small, and noise returns; too large, and important moves may be missed.

Common Uses:

• Identifying trends and reversals.

• Setting stop-loss levels based on brick breaks.

• Swing trading and position trading (less suited for scalping).

Renko charts are popular among traders who prefer clean, trend-focused price action analysis without the distraction of time-based fluctuations.