Renko

Overview

Renko (from Japanese “renga” = brick) is a chart type that displays price movement as bricks of fixed size, regardless of time. A new brick is only added when price moves a defined amount in one direction. The result: time is removed from the chart entirely; only price movement matters.

This produces an exceptionally clean view of trends — but at the cost of completely losing time-based context.

How It Works

• Set a brick size (e.g., 10 pips on EUR/USD, $100 on Bitcoin)
• A new brick forms when price moves brick-size in either direction
• Consecutive bricks in the same direction form a solid color column
• Reversal requires double brick size move (typically) for direction change

Default Settings

• Brick size: typically ATR-based (e.g., 14-day ATR / 2) or fixed (10 pips, 1 % of price)
• Reversal threshold: 2× brick size (standard)
• Source: close prices or high/low (varies by platform)

How to Use It

1. Trend Identification

The clearest possible trend signal:

• Solid run of green bricks = clean uptrend
• Solid run of red bricks = clean downtrend
• Alternating green / red = reversal or consolidation

2. Trend Following Entries

Enter on first brick of new color after a pause:

• After series of green bricks, a red brick forms but is quickly followed by green again — long entry on second green

3. Trend Reversal

When 2 (or more) opposite-color bricks appear after a sustained run = trend reversal signal. Exit existing position.

4. Support / Resistance Identification

Horizontal levels become very visible on Renko — price often respects them cleanly across multiple visits.

Strengths

• Eliminates time noise — only meaningful price movements appear
• Trends are unmistakable visually
• Excellent for spotting clean breakouts and reversals
• Reduces emotional reactions to intraday volatility

Weaknesses & Common Mistakes

• Lagging on reversals — need 2 bricks of opposite color to confirm; can be late
• No time information — a trade signal from Renko gives no estimate of timing
• Brick size selection critical — too small = noise, too large = miss signals
• Hides important real-time price action — news spikes, candlestick patterns invisible
• Stops placement tricky — Renko shows static bricks but real price oscillates within them

Best Combinations

• Renko + Time Charts — use Renko for trend direction, regular charts for entry timing
• Renko + Moving Average — trade brick color changes only in MA-confirmed direction
• Renko + ATR-based brick size — adapts to volatility automatically

Practical Example

Bitcoin Renko chart with $200 brick size. After consolidation (alternating red/green bricks), 5 consecutive green bricks form — clean uptrend started. Long entry on 2nd green brick, stop below last red brick. Hold until 2 consecutive red bricks form (trend reversal confirmation).

Bottom Line

Renko strips away everything except price movement. Use it when you want to see trends without the visual noise of time-based charts — just don’t forget that real prices keep moving between the bricks.