Renko chart is completely time-independent, based on price movement only and help filter out the noise that can occur on other chart types. Renko is built from bricks, which are created only when the price exceeds the body of the previous brick by a certain size, which is set by the trader in the chart parameters.
It is important to note that new bricks are only added when price movements completely fill the predetermined brick size. Prices may exceed the values of the previous brick (either above or below), however a new brick will not be formed until the price movement is large enough. For example, let’s say the brick size is set to 2 points and the last brick covers prices of $52 to $54. The new brick won’t be formed until prices close either at or above $56 or at or below $50. If price closes above $56, for example $57; the new brick must still stop at $56.
There are two rules regarding brick placement:
There are four different brick types, generated by a gocharting.com renko chart:
There are two different methods for calculating bricks:
In the Renko chart settings, you can choose one of several styles based on which the chart will be drawn:
Smoothes out the chart more than Classic Renko because an open price is in the middle of a brick. They will show fewer pullbacks and trend reversals are easier to spot. An extension and inversion value of 50% would create Median Renko bricks.
Will give you very smooth reversals, and the charts are smooth out more than with Median Renko. One special property of these Renko form is, that when using an extension and inversion percentage of 12.5%, the slope of up-bricks will be 45° and for down bricks -45°
Smooths out the majority of pullbacks and only shows high probability reversals. Turbo Renko is using the extension 12% of the brick and the inversion of 100%. Price has to reverse by a complete brick to form a reversal, illustrated as the dashed bricks.
Allows you to create your own Renko structure based on user input values on Extension and Reversal
Renko Charts in GoCharting come with additional commentary to include important pivotal brick levels
Traders who use Renko charts typically do so because they are easy to use and interpret. They are also different from atypical candlestick chart because they filter out all other variables besides price movement. There are many uses for Renko Charts, with some of the more popular uses being the chance to discover basic support and resistance levels, breakouts, and to generate signals with additional indicators.
Support and Resistance Levels — Frequently, when using Renko Charts, trading ranges appear when bars are generated between levels of support and resistance.
Breakouts — Breakouts occur when bars begin to generate in a defined direction after a period of trading within a support and resistance bound trading range.
Overbought/Oversold — A good example of using additional indicators within a renko chart to identify trade signals would be using the RSI in conjunction with renko bars to define overbought or oversold levels.
Please note that Renko brick prices are inherently synthetic because of their nature and therefore, they do not reflect market prices at any precise moment in time, as normal bars do. While Renko bricks may provide a useful interpretation of price activity in discretionary trading, using them to backtest, where order fills must reflect actual market prices at a specific time, is not recommended. Backtesting orders filled at Renko chart prices will inevitably be inaccurate