Renko

Renko charts are a type of price chart used in technical analysis that emphasizes price movement over time. They are built from bricks of fixed size, with a new brick drawn only when the price moves by at least the box size in the same direction. Time stamps and trading volume are not part of the chart’s construction, and the direction of the bricks indicates the prevailing trend.

Renko appears to have originated in Japan in the 19th century as a method to filter market noise. The name derives from the Japanese word for bricks. Although exact origins are uncertain, Renko charts gained popularity with modern charting software and are widely used in technical analysis today.

Construction depends on two parameters: box size and reversal amount. The box size is the price increment represented by each brick. A new brick is added when the price moves by at least one box size in the trend’s direction; if the price moves beyond multiple boxes, multiple bricks of the same color may be added. A reversal occurs only after the price has moved a specified amount in the opposite direction, causing bricks to flip.

Applications include trend identification, support and resistance awareness, and breakout detection. Because bricks are insensitive to time, Renko charts often filter out intraday noise and can provide clearer entry and exit signals when used with indicators such as moving averages or oscillators.

Advantages include a clean depiction of trends and reduced impact from short-term volatility. Limitations include lag, sensitivity to the chosen box size, and potential ambiguity during sideways markets. Different charting platforms may implement Renko with varying reversal rules, so users should understand their specific configuration. Related chart types include point-and-figure charts and candlestick charts, which incorporate time and/or open-high-low-close data.