Renko charts are developed by the Japanese and they are built utilizing the movement of price in place of both standardized time intervals and price similar to other charts. The good thing about these charts is you can easily read them as there are present markers on them, known as blocks, boxes, or bricks. These charts are more uniform in comparison to a candlestick chart that other traders opt to use to follow the movements in price.
In a Renko chart, a new brick gets formed when there is a price movement in a particular price amount. Every block is placed at a 45o angle that includes both up and down to the previous brick. Commonly an up brick happens to be colored green or white and the down brick is identified as red or black.
The similarities of Renko
Renko has huge similarities to the American figure and point but the difference lies in the fact that the former has boxes and blocks in place of O and X columns. New traders aren’t very familiar with the Renko chart but it is hugely utilized by professional traders. For using the charts you need to know the method of drawing them. Again, you are also needed to learn the method of using them for financial markets.
The method of trading Renko charts efficiently
When you use Renko charts in an ideal manner, you will find them to be hugely helpful. Below are mentioned 4 trading rules that you can use for turning a Renko trading system highly accurate:
- When the earlier Renko brick is red or green ahead of a significant risk event then there is a chance that the price would go up or down and it will be high.
- Double bottoms and double tops have got higher chances of success in comparison to the candlestick chart.
- For confirming a breakout, utilize the two bricks rule. When 2 consecutive bricks do close below or above the resistance level and key support, then the breakout would extend.
- For finding reversal patterns, you must use these charts as they would be hugely helpful.
Kinds of Renko charts
There are a couple of Renko charts that are formed on the calculations and they are open/close charts and high/low charts.
Open/Close Renko charts – Open/Close charts consider only the moves in price and they are found in the range of Open/Close of the price action.
High/Low Renko charts – The High/Low charts consider the behavior of every price action. These charts comprise price action that takes between the highest and the lowest point on a chart.
The color or a Renko chart
For identifying Renko, you need to notice the alteration of color. You will observe an alteration in the color of the brick and it strongly symbolizes an alteration in the cost direction. So, when there is present a green brick followed by a red brick then it shows that the price did not move ten points for forming the red brick. The cost needs to move ten ticks from the green-colored brick and then ten ticks further for finishing the red brick.