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The Renko charting method has acquired its name from "renga" which is the Japanese word for
bricks. In Renko charts a line (or "brick") is drawn in the direction of the prior move only if prices
move by a minimum amount (i.e., the box size). The bricks are always equal in size. For
example, in a 5-unit Renko chart, a 20-point rally is displayed as four, 5-unit tall Renko bricks. Basic trend reversals are signaled with the emergence of a new white or black brick. A new white
brick indicates the beginning of a new up-trend. A new black brick indicates the beginning of a
new downtrend. Draw a new line only when a predetermined amount is exceeded from the top/
bottom. All the bricks are of the same size. Therefore, more than one line could be drawn in a
single period. Calculation Renko charts are always based on closing prices. You specify a "box size" which determines the
minimum price change to display. To draw Renko bricks, current period's close is compared with
the high and low of the previous brick (white or black). If the closing price rises above the top of
the previous brick by at least the box size, one or more white bricks are drawn in new columns.
The height of the bricks is always equal to the box size. If the closing price falls below the bottom of the previous brick by at least the box size, one or
more black bricks are drawn in new columns. Again, the height of the bricks is always equal to
the box size. If prices move more than the box size, but not enough to create two bricks, only one
brick is drawn. For example, in a two-unit Renko chart, if the prices move from 100 to 103, only
one white brick is drawn from 100 to 102. The rest of the move, from 102 to 103, is not shown on
the Renko chart. Indicators calculated on Renko charts use all the data in each column and then display the
average value of the indicator for that column. Renko (Bricks) are drawn equal in size for a
determined amount. If prices change by the determined amount or more, a new brick is drawn. If prices change by less than the determined amount, the new price is ignored. Renko Charts
display price movements if they are bigger than a fixed amount. Usage The Renko chart is a trend following technique. But sometimes Renko charts gives signals near
the end of short-lived trends. However, the expectation with a trend following technique is that it
allows you to ride the major portion of significant trends Since a Renko chart isolates the underlying price trend by filtering out the minor price changes,
Renko charts can also be very helpful when determining support and resistance levels. A price
level at which you would expect selling to take place due to technical analysis. The resistance
level of one is the support level for the other
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