Renko charts allow traders to know the price movement of an asset filtering minor price movements in trading. IT allows you to easily spot price trend since the small fluctuations are removed. Thus, the Renko chart is generally popular among traders.
In setting Renko charts, you need to set the brick size, first. For the stock market, the brick size can be $0.10, while, for the forex market, a brick size can be 10 pips. The Renko chart will form a brick once the price has made movements as much as the brick size.
If we compare it to the candlestick chart, candlestick chart shows the price movement in a period of time, like one minute or one day. On the other hand, a Renko chart does not have a time limit.
It can take 2,5 minutes, four hours, or nine hours. That time of a Renko chart to shape is highly dependent on the asset price volatility and the brick size you set.
Using Renko Charts in Trading
Renko chart can be an effective way for day traders to find trends, breakouts, areas of support and resistance, and reversals. Its simplicity makes day traders can easily see the price actions and signals for their trades.
Traders usually use technical indicators to help them get more information due to the Renko chart’s price action nature. For instance, traders can use moving average convergence/divergence (MACD) to measure the price movement to know the bullish and bearish signals.
The bullish signals appear when the MACD line crosses above the signal line, while, the bearish signals appear when the MACD line crosses below the signal line.