Concept
Renko Charts
A Renko chart plots bricks of a fixed price size, adding a new brick only when price moves by that amount. Time is not an axis: a quiet hour and an active hour occupy the same space if they produced the same movement.
How to read it
- Brick size is chosen by the user or derived from ATR. It determines everything about how the chart looks.
- A brick is added only when price has moved a full brick beyond the last one, so small fluctuations produce no bricks at all.
- Because time is discarded, the horizontal axis carries no duration information — consecutive bricks may be minutes or days apart.
What it does not tell you
- The current brick can appear and disappear as price fluctuates until the move is complete. Signals read from a forming brick can therefore change, which is the repainting concern often raised about Renko.
- Brick size choice dominates the output. The same data with a different brick size produces a materially different chart, and choosing a size that looked good historically is a form of overfitting.
- Removing time removes real information. A move completed in ten minutes and one taking three weeks look identical.
Frequently asked questions
How do Renko charts work?
A new brick is added each time price moves by a fixed amount from the last brick. Movement smaller than that produces nothing, and time is not represented on the chart.
Do Renko charts repaint?
The completed bricks do not change, but the forming brick can appear and disappear until the required move is complete. Anything read from an unfinished brick can therefore change.
What brick size should I use?
There is no correct size, and it changes the chart substantially. Selecting the size that performed best on historical data is a form of curve fitting rather than an optimisation with a durable answer.
Are Renko charts better for trend following?
They look cleaner in trends because small fluctuations produce no bricks. That is the transformation working as designed rather than evidence the underlying method performs better.
Related
- Chart Types: Line, Bar, Candlestick, Heikin Ashi and Renko — Concept
- Heikin Ashi — Concept
- Overfitting and Curve Fitting — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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