A brief overview of Renko Chart – An introduction

Renko charts are a particular kind of trading chart that eliminates minute price changes to allow traders to concentrate on the main trend. In comparison to candlestick charts, which some traders prefer to track price movements, Renko charts are also simpler to read because their markers, known as "bricks," "boxes," or "blocks," are more uniform.

How do Renko Charts work :

To produce a Renko brick, the price must move a certain amount. The Renko bricks turn white or green as the price increases. The bricks are either black or red when the price is dropping. This makes it simple to identify the direction that the price is currently moving.

Let's examine the price chart for the S&P BSE SENSEX 50 Index below as an example. If a 35-brick size is selected, it means that in order to create a new brick in the current direction, the price must change 35 points from the closing price of the previous brick.

Bricks cannot develop next to one another; thus, the price must shift 70 points to create a brick facing the other way. In this instance, the bricks only show moves that total 35 points. Bricks cannot be created from moves that are less than 35 points from the preceding brick.

Note that the chart's timeframe is set to one day. This implies that fresh Renko bricks can only develop based on the day's closing price. The price must fall 35 points below the low of the last red brick, which was located at the extreme left of the chart, for another red brick to develop.

A new brick would not be drawn if the price closed fewer than 35 points below the prior red brick since only closing prices count in a daily time period, which allows for price drops of up to 50 points below that threshold. Renko charts can be used effectively to help clear up confusion over price direction and can be used into a trend trading strategy.