Renko Charts

Complete Trading Guide & Cheat Sheet

What are Renko Charts?

Renko charts are a type of financial chart created by the Japanese that focuses purely on price movements while filtering out time and minor price movements. The word "Renko" comes from the Japanese word "renga," which means brick, referring to how the chart looks like a series of bricks.

Renko charts filter out market noise and help identify trends clearly.

Key Characteristics

Brick Formation

  • Fixed price movement (box size)
  • Green/White: upward movement
  • Red/Black: downward movement

Box Size

  • Fixed price amount
  • ATR-based
  • Percentage of price

Time Independence

  • Time-independent formation
  • Focus on price action
  • Variable brick creation time

Box Size Made Simple

Think of Renko box size like building blocks. Each block shows how much the price needs to move before we draw a new brick on our chart. Bigger blocks filter out small price moves, while smaller blocks show more detail.

How to Choose Your Box Size

For 30-Minute Chart

Big blocks to see main trends:

  • Use ATR × 2.0
  • Filters out most market noise
  • Shows major gold price swings
Example:

If Gold ATR = $2.50

  • Box size will be $5.00
  • New brick forms after each $5.00 move

For 15-Minute Chart

Medium blocks for trading decisions:

  • Use ATR × 1.5
  • Balanced view of gold moves
  • Good for entry/exit points
Example:

If Gold ATR = $2.50

  • Box size will be $3.75
  • New brick forms after each $3.75 move

For 5-Minute Chart

Small blocks for precise timing:

  • Use ATR × 1.0
  • Shows detailed gold price action
  • Best for scalping entries
Example:

If Gold ATR = $2.50

  • Box size will be $2.50
  • New brick forms after each $2.50 move

Quick Tips for Gold Trading

Too Big

  • Miss important gold swings
  • Slow to show trend changes
  • Better for daily gold trends

Too Small

  • Too many false moves
  • Hard to read gold direction
  • Whipsaws during volatile hours

Just Right

  • Clear gold trends
  • Easy to spot key levels
  • Good for London/NY sessions

Gold Trading Tip:

Start with the ATR setting for your timeframe. During active gold trading sessions (London/NY overlap), you might want to use slightly larger box sizes to filter out the increased volatility. During quieter Asian sessions, smaller box sizes can work better.

Types of Renko Candles

1. Bullish Renko Brick

  • Appears when price rises by the box size amount
  • Typically colored green or white
  • Represents strong upward momentum
  • Forms only when the entire box size is completed
  • Used to identify potential buying opportunities
  • Common in uptrend confirmations

2. Bearish Renko Brick

  • Forms when price falls by the box size amount
  • Typically colored red or black
  • Indicates strong downward pressure
  • Must complete full box size to form
  • Signals potential selling opportunities
  • Used in downtrend confirmations

3. Renko Brick with Wick

  • Shows price rejection beyond the brick
  • Indicates temporary price extremes
  • Important for identifying reversals
  • Common at support/resistance levels
  • Helps gauge market sentiment
  • Strong signal when combined with trends

Important Note:

Unlike traditional candlesticks, Renko bricks form only when price moves the full box size amount. This filtering of minor price movements helps identify trends more clearly and reduces market noise. Wicks, when shown, indicate price rejection levels that didn't result in a complete new brick formation.

Renko vs Heikin-Ashi Comparison

Feature Renko Charts Heikin-Ashi Charts
Price Calculation Fixed box size movements only Average of open, high, low, and close prices
Time Factor Time-independent, bricks form only on price movement Time-based, new candle for each time period
Noise Filtering High (ignores all movements smaller than box size) Medium (smooths price action through averaging)
Trend Identification Very clear, immediate trend visualization Clear but with more nuanced price information
Price Gaps No gaps between bricks Can show gaps between candles
Volatility Display Limited to brick size and wicks Shows full price range within period
Best Use Case Trend following and breakout strategies Swing trading and trend confirmation
Signal Speed Slower, but more reliable signals Faster signals, but more prone to noise
Learning Curve Easier to interpret Moderate learning curve
Price Information Shows directional movement only Shows more detailed price action

Trading Tip:

Many traders use both Renko and Heikin-Ashi charts in combination. Renko for identifying the primary trend and key levels, while Heikin-Ashi for timing entries and exits within the trend.

Detailed Entry Strategy Guide

1

Timeframe Analysis

Primary Timeframes:

  • 30-minute: Trend direction & major levels
  • 15-minute: Primary trading timeframe
  • 5-minute: Entry timing & precision

Timeframe Alignment:

  • 30m: Must show clear trend (4+ bricks)
  • 15m: Trading signals & setups
  • 5m: Fine-tune entry points
2

Box Size Configuration

Box Size Selection:

  • 30m chart: ATR(14) × 2
  • 15m chart: ATR(14) × 1.5
  • 5m chart: ATR(14) × 1

Validation:

  • Box size should capture meaningful moves
  • Avoid too many/few bricks formation
  • Adjust based on volatility
3

Trend Confirmation

30-Minute Requirements:

  • Minimum 4 consecutive same-color bricks
  • Price above/below 20 EMA
  • Clear support/resistance levels
  • No opposing wicks on last 2 bricks

15-Minute Validation:

  • 3 consecutive bricks in trend direction
  • Price respecting 20 EMA as support/resistance
  • Volume increasing with each brick
4

Entry Rules

Long Entry Conditions:

  • 30m: Uptrend with price above 20 EMA
  • 15m: 3 green bricks + EMA support
  • 5m: Entry at brick open after confirmation

Short Entry Conditions:

  • 30m: Downtrend with price below 20 EMA
  • 15m: 3 red bricks + EMA resistance
  • 5m: Entry at brick open after confirmation
5

Risk Management

Stop Loss Placement:

  • Behind 3 bricks on 15m timeframe
  • Add 1 box size as buffer
  • Maximum 2% account risk per trade

Position Sizing:

  • Calculate based on stop loss distance
  • Scale in allowed (maximum 3 entries)
  • Each scale-in maximum 0.5% risk
6

Trade Management

Take Profit Levels:

  • TP1: 2× risk (30% position)
  • TP2: 3× risk (40% position)
  • TP3: 4× risk (30% position)

Stop Management:

  • Move to break-even after TP1
  • Trail by 2 bricks after TP2
  • Exit full position if trend breaks

Trading Examples

Good Trade Example

Market Analysis:
  • 30m: 5 consecutive green bricks above 20 EMA
  • 15m: 3 green bricks with increasing volume
  • 5m: Clear momentum and no divergence
  • Strong support at $148.50 (previous resistance)
Entry Setup:
  • Entry Price: $150.00
  • Stop Loss: $148.50 (1.5 ATR distance)
  • Position Size: Risking 1% ($1,000 account)
  • Volume: 50% above 20-period average
Trade Management:
  • TP1 hit at $151.50 (30% closed)
  • Stop moved to break-even
  • TP2 hit at $152.25 (40% closed)
  • Trailing stop activated
  • Final exit at $153.00 on reversal signal
Why This Trade Worked:
  • Perfect timeframe alignment
  • Strong volume confirmation
  • Clear support level nearby
  • Proper position sizing
  • Disciplined exit strategy

Bad Trade Example

Market Analysis:
  • 30m: Mixed signals, no clear trend
  • 15m: 2 green bricks but low volume
  • 5m: RSI showing bearish divergence
  • Major resistance level nearby at $155.00
Entry Mistakes:
  • Entry Price: $154.50 (too close to resistance)
  • Stop Loss: $153.50 (too tight)
  • Position Size: Risking 5% (too large)
  • Volume: 30% below average
Trade Outcome:
  • Price rejected at resistance
  • Stop loss hit quickly
  • Larger than necessary loss
  • No proper exit strategy planned
Why This Trade Failed:
  • No timeframe alignment
  • Ignored volume analysis
  • Poor entry location
  • Risk management violations
  • Emotional entry without plan

Critical Reminder:

Success in Renko trading comes from strict adherence to these rules. The good example shows how following the system leads to profitable trades, while the bad example demonstrates how breaking these rules typically results in losses. Always ensure all conditions are met before entering a trade.

Trading Strategies

Trend Following

  • Enter long on green brick
  • Enter short on red brick
  • Stop loss behind previous brick

Breakout Strategy

  • Wait for consolidation
  • Enter on breakout brick
  • Target: 2-3x box size

Reversal Strategy

  • Enter on direction change
  • Confirm with 2-3 bricks
  • Exit on opposite brick

Advanced Concepts

Risk Management

  • Risk 1-2% per trade
  • Stop loss placement strategies
  • Take profit optimization

Common Patterns

  • Double/Triple tops and bottoms
  • Consolidation patterns
  • Breakout formations

Best Practices

  • Wait for brick completion
  • Use multiple timeframes
  • Combine with other indicators