'Renko' is a non-standard chart
The exotic type of Renko charts ignores time, and like no other type of chart, they allow you to detect trends.
Renko is a unique chart that complements several non-standard charts, including Kagi. Renko and other mentioned 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 excellent strategy by FinmaxFX - https://finmaxfx.com/en/analitics/investment-strategies/2187-forex-renko-charts-strategy.html.
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 indefinite periods. If, for example, the price fluctuates within a specific range and does 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 adding 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.
Field length - the value by which the price should change 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 be 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)
Brief history of the "Renko" chart
For the first time, this type of graphic is mentioned in Steve Neeson's book Beyond Candlesticks. The chart's name, "Renko," comes from the Japanese word "renga," which means "brick" in translation. In fact, the Renko chart consists of several 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 particular 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 indefinite periods. If, for example, the price fluctuates within a specific range and does 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 adding 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 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 be 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 apparent advantage of Renco over other charts is that it clearly shows 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.
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