The exotic type of Renko charts ignores time, and like no other type of charts, it allows you to detect trends.
non-standard chart

Renko is a unique chart that complements a number of non-standard charts, which also includes Kagi. Renko and other mentioned types of charts differ in that they ignore time and focus only on significant price movements. If you want to know how to use these charts for profiting, read this awesome strategy by FinmaxFX -

Brief history of the "Renko" chart

For the first time this type of graphics is mentioned in the book "Beyond Candlesticks" by Steve Neeson. The name of the chart "Renko" comes from the Japanese word "renga", which means "brick" in translation. In fact, the Renko chart consists of a number of bricks.

Details of the Renko chart

The Renco graph consists of vertical rectangles in black or white. When the price increases or decreases by a certain value (the length of the field specified by the analyst), another brick is added.

If the price falls, the brick is filled (not necessarily black), and if the price rises, the brick remains hollow.

It is important to note that any of the bricks may contain an indefinite number of periods. If, for example, the price fluctuated within a certain range and did not rise and fall enough to add another brick to the chart, the chart will remain unchanged.

It is important to remember that a brick is added only if the price has changed by at least the length of the field: if the price has increased from 100 to 109 with the length of the field at 5, then the chart will add only one brick, because to add the second one was not enough for one point. This feature of Renko allows you to neglect minor price fluctuations and focus only on significant movements.

Renko chart parameters

Before drawing a chart, it is necessary to define two parameters:

field length - the value by which the price should change in order to form a subsequent brick; it can take an absolute value (for example, 5, but must be selected depending on the price of the instrument), or based on the relative value of the indicator ATR

price benchmark - Renco can be based on either closing prices (recommended) or maximums and minimums (in this case, priority over maximum: if the difference between the maximum and the previous price has reached the length of the field, then a hollow brick is applied and the minimum is ignored)

Renko's usefulness for analysts

The most obvious advantage of Renco over other charts is that Renco is clearly showing trends. Based on this property, a simple rule is formed: buy on hollow bricks, sell on painted bricks. For the sake of reliability, it is desirable to wait for 2 bricks, and act (buy or sell) on the third.