Renko Chart
A Renko chart is a price-only charting method that constructs uniform-sized bricks whenever the asset moves a set amount, filtering out time and minor fluctuations entirely.
Renko charts originated in Japan and take their name from the Japanese word for brick, 'renga.' Unlike conventional bar or candlestick charts, Renko charts ignore time completely and only add a new brick when price moves a specified distance — the 'brick size' — in either direction. Each brick occupies the same vertical space, so a series of rising bricks stacked diagonally upward reflected sustained upward movement in historical price data, while falling bricks reflected sustained downward movement.
The primary purpose of a Renko chart is noise reduction. Because small counter-moves that fall short of the brick size are simply ignored, historical Renko charts show cleaner sequences of price action than equivalent time-based charts. Analysts who studied Renko charts historically noted that sequences of same-colored bricks in one direction corresponded with trending periods in the underlying asset, while rapid alternation between opposing bricks appeared alongside choppy, range-bound market conditions.
Choosing the brick size is the central parameter in Renko analysis. A small brick size produces many bricks and more visual detail but also more noise; a large brick size creates fewer bricks and smoother sequences but may lag before reflecting a meaningful reversal. Historically, practitioners calibrated brick size to a fixed dollar amount, a percentage of price, or a multiple of the asset's Average True Range.
Support and resistance levels on Renko charts were identified by noting price levels at which bricks repeatedly reversed direction in historical data. A level where multiple reversals clustered in the past was treated as a significant reference zone. Similarly, horizontal areas where the series of bricks paused before continuing were studied as consolidation regions.
Renko charts have been used alongside volume indicators since the chart itself carries no volume information — each brick simply records a price threshold being crossed, not the activity that occurred within that range. Practitioners historically combined Renko with separate volume plots to assess whether price moves were accompanied by elevated or subdued participation.
The method is compatible with any tradable market including equities, futures, and currencies, and its simplicity has kept it in continuous use among technically oriented market participants since its introduction to Western audiences in the late twentieth century.