Renko Charts
Renko charts — “renga” means brick in Japanese — plot price moves as bricks of equal size. A new brick is added only when the price moves a predetermined amount in either direction. Time is irrelevant: a Renko chart can stay flat for an hour or roar through a hundred bricks in five minutes. Indian traders use Renko to filter out noise and focus on real directional moves.
Key takeaways:
- Renko charts ignore time; bricks form only when price moves a set amount (the box size).
- Bullish (green) bricks form on upward moves; bearish (red) bricks form on downward moves.
- A reversal brick requires double the box size in the opposite direction.
- Smooths out minor fluctuations; great for trend identification.
- Not suitable for exact entries — combine with candlestick chart for execution.
How Renko bricks work
You set a box size (say 10 points for Nifty). A new green brick prints only when price rises 10 points above the high of the prior brick. A red brick prints only when price falls 10 points below the low of the prior brick — but a reversal requires a 20-point opposite move (one to retrace the current brick, one to form the new one).
Choosing box size
- Fixed value: Set a number based on the instrument’s typical range — e.g., 50 points for Bank Nifty.
- ATR-based: Use the Average True Range over a recent period as the box size; adapts to volatility.
- Percentage: Use a % of price; useful for high-priced stocks like MRF.
Reading Renko signals
- Sequence of same-colour bricks: Confirmed trend.
- First reversal brick: Possible trend change; needs follow-through for confirmation.
- Trend-line breaks on Renko: Cleaner than on candlestick charts because noise is removed.
- Support/resistance: Easier to spot horizontal levels where multiple reversals occur.
Strengths and weaknesses
| Strengths | Weaknesses |
|---|---|
| Clean trend visualisation | No time on x-axis — hard to align with news |
| Less noise than candlestick | Reversal needs double the box; lags major turns |
| Easy to spot S/R levels | Bricks form irregularly — hard for time-based strategies |
Combining Renko with other tools
Add a moving average to Renko bricks to confirm trend direction. Use volume bars beneath to verify breakouts. When Renko prints a reversal brick at a high-volume node from the volume profile, the signal carries more weight.
Where Renko shines for Indian traders
Renko works well on Nifty and Bank Nifty futures because the underlying moves enough each day to form clean brick sequences. On illiquid small-caps, bricks may form rarely or jump erratically. For positional traders using daily data, Renko offers a clutter-free way to maintain trend discipline.
Frequently asked questions
Does Renko ignore intraday price spikes?
Yes — only confirmed moves of the box size print a brick, filtering out sub-box noise.
What box size should I use?
A common starting point is the daily ATR divided by 10–20. Experiment until bricks form roughly once or twice per session.
Is Renko better than candlestick?
Different tools for different jobs. Use Renko for trend, candlestick for entries.
Does Lemonn’s charting tool support Renko?
Yes — Renko is available alongside Heikin Ashi, Line and Bar chart types.
