Beginner's Guide to the Renko Charts Indicator on Trading View

Beginner's Guide to the Renko Charts Indicator on Trading View

Reading time: 5 minutes

Unlike the traditional ‘Open High Low Close’ (OHLC) time series charts, which rely on ‘time’, a Renko chart focusses on price movement and is displayed as a series of ‘Bricks’, overlooking or ‘filtering’ the elements of time and volume.

Figure 1 shows an example of the euro versus the US dollar (EUR/USD) plotted on a time series chart on Trading View, while Figure 2, also on Trading View, displays the same currency pair using the Renko chart type.

Figure 1

Figure 2

Originating in Japan and deriving its name from ‘Renga’ – the Japanese translation for ‘Brick’ – a new Brick will only form if price action has reached a preset value, commonly referred to as the ‘Box Size’ or ‘Brick Size’. The Box Size is generally set according to your trading style. In other words, if you are a short-term day trader, you may set your Box Size lower than a longer-term position trader. If price continues to range within this preset value, no new Bricks will form. This is unlike a time series chart, which would continue establishing new candlesticks (or bars) regardless of how much the price fluctuates.

How to Apply Renko Charts on TradingView

Setting up Renko charts on TradingView is straightforward.

Assuming you have already opened your chart of interest – below, we are still looking at the EUR/USD daily timeframe – to open a Renko chart, click on the chart type tab on the main toolbar (depicted as two candles) and scroll down and select the Renko chart, as shown in Figure 3. This will automatically modify the chart and display Renko Bricks.

Figure 3

As displayed in Figure 4, Renko Bricks can be calculated using three different methods: the ‘Average True Range (ATR)’, ‘Traditional’, or ‘Percentage’. Chart settings can be accessed by right-clicking on the chart and selecting ‘Settings’.

The ATR is set to its default 14 periods, so once a Brick reaches its ATR value (derived from a candlestick chart), a new up or down Brick will form.

As its name implies, the Traditional method allows the user to predefine the Box Size, and a new Brick will form once this value is reached.

The Percentage approach is determined by a predefined percentage set by the user.

As a reminder, investors can adapt the Box Size to suit their trading preferences.

Figure 4

Beginners Guide to Using Renko Charts

Renko Trend:

Renko charts filter time, displaying new Bricks when the price moves by a predetermined value. This often delivers a clearer picture of a market’s trend. Compare the daily chart of the AUD/USD currency pair using a Renko chart and a candlestick time-series chart (Figure 1A below). You will note that from the beginning of 2018, although both charts resemble each other’s movement, the Renko chart (left) provides a stronger picture of the trend and price action.

Figure 1A

Renko Support and Resistance:

Traders and investors widely employ the Renko chart to identify support and resistance levels. Using the same AUD/USD daily chart (Figure 1B below), a support and resistance level formed between 2019 and early 2022 around the US$0.70 value. This was clean and easily recognisable on the Renko chart (left). Compare this with the candlestick time series chart (right); although the level is still noticeable, it is clearer on the Renko chart.

It is also worth noting that you can apply trendline support and resistance lines to Renko charts as well as other drawing tools.

Figure 1B

Renko Chart Patterns:

Like candlestick and bar charts, the Renko chart can form actionable patterns. Figure 1C below shows a head and shoulders top pattern formed on the daily chart of AUD/USD in 2021 (black boxes). Although a chartist could identify the head and shoulders pattern on the candlestick chart (right), it is undeniable that the Renko chart offers a far cleaner representation of the pattern (left). The same can be said for the double-bottom pattern formed around A$0.7023 in early 2022 (blue lines). While the candlestick chart’s double-bottom configuration is recognisable, its structure is far stronger on the Renko chart.

Figure 1C

Renko FAQs

1. What is the Renko chart?

A Renko chart is formed through ‘Bricks’, using price fluctuations set by a predefined amount.

2. Are Renko charts reliable?

Traders and investors report that the Renko chart is generally a reliable addition to their toolbox, noting the ease with which trends and support/resistance can be defined.

3. Can I use technical indicators on the Renko chart?

Investors use technical indicators on Renko charts in addition to basic support and resistance and chart patterns. While Renko charts help filter price action, professional investors seldom rely solely on the chart to generate trading decisions.

4. Can I trade with Renko charts with FP Markets?

With FP Markets, you can access Trading View's charting package if you have a live trading account and use cTrader.

You can find more information about how to set things up here.