Renko Chart

What is a Renko chart?

A Renko chart is a price-only charting method that builds a series of bricks (or “boxes”) based on price movement rather than fixed time intervals. Each brick is plotted at a 45-degree angle from the previous brick and represents a fixed price change (the box size). Up bricks are typically green/white and down bricks red/black. Renko charts often use closing prices and filter out smaller, noisy movements that don’t reach the box size.

Key points

• Bricks form only when price moves by at least the chosen box size (or ATR-based box size).
• Time is not fixed—one brick can take minutes or months to form.
• Renko highlights trends and support/resistance by filtering noise.
• Because they ignore intraperiod highs and lows, Renko charts sacrifice some price detail for clarity.
• Trading signals are commonly taken when brick color/direction changes (trend change or pullback).

How Renko charts are constructed

1. Choose a box size (fixed amount, e.g., $0.25 or 50 pips, or a volatility-based ATR value).
2. Start from the initial close. A new up brick is added once price closes at or above the previous brick’s top plus the box size; a new down brick appears once price closes at or below the previous brick’s bottom minus the box size.
3. Bricks stack diagonally—opposite-direction bricks do not sit beside each other; price must move the full box size to reverse the chart.

Example: A stock at $10 with a $0.25 box size will add an up brick only when the close reaches $10.25 or higher. A down brick below a prior up brick requires the close to reach $10.00.

What Renko charts reveal (and how traders use them)

• Trend identification: Long runs of same-colored bricks show persistent trends.
• Support and resistance: Fewer false signals make horizontal levels easier to spot.
• Entry/exit signals:
• Enter long on a new up brick after a brief pullback in an uptrend.
• Enter short on a new down brick after a pullback in a downtrend.
• Signal sensitivity depends on box size: smaller boxes give earlier but noisier signals; larger boxes reduce noise but lag.

Many traders require confirmation (e.g., two bricks or alignment with another indicator) before entering.

Renko vs Heikin Ashi

• Renko: fixed box sizes (or ATR), bricks based strictly on price movement; time intervals vary.
• Heikin Ashi: candles average open/high/low/close across periods, smoothing price while keeping time-based candles.
  Both smooth noise and highlight trends, but they use different construction methods and convey different price information.

Limitations and risks

• Loss of intraperiod detail: highs/lows and time information are omitted.
• Delayed alerts: price may move far before enough closes occur to form reversal bricks.
• False signals/whipsaws: color changes can occur prematurely in choppy markets.
• Risk management: because Renko can lag, use fixed stop-loss orders and corroborating indicators rather than relying solely on Renko signals.

Setting up Renko charts

• Thinkorswim: In Time Axis Settings, choose Aggregation type = Range and select Renko Bars; set the price range to the desired box size.
• TradingView: Renko is available via the chart type menu (paid subscription may be required); open Renko settings to set the box size or ATR option.

Choosing a box size

• Consider time horizon and trading style: smaller boxes suit short-term trades; larger boxes suit longer-term trend following.
• ATR-based box sizes adapt to volatility—useful if volatility changes over time.
• Backtest different sizes and use higher-timeframe confirmation to find what fits your asset and strategy.

Practical tips

• Combine Renko with trend indicators (moving averages, ADX) or volume for confirmation.
• Use multiple timeframes or a hybrid approach (Renko for trend, time-based chart for entries/exits).
• Always define stop-loss and position sizing before trading Renko signals.

Quick FAQ

Q: Do Renko bricks use time?
A: No—bricks are formed by price movement, so time between bricks varies.

Q: Can the box size be volatility-based?
A: Yes. ATR-based box sizes adjust to changing volatility.

Q: Are Renko charts better for trend trading?
A: They are well suited to trend identification, but they should be used with risk controls and other tools to avoid late or false signals.