Time charts vs renko bar charts. A dear friend who lives in Poland created a renko bar chart for me to go along with a Fibonacci indicator she also created for me. I’ve been using 2-tick renko bar charts to fine-tune entries and define risk or exit strategies for intraday trading since. Like most of you, I learned how to read charts using minute timeframes and I’ve used a 15-minute chart for intraday setups for quite some time, but since my renko bar was created for me, I’ve been saying I’d really like to switch my 15-minute charts to higher renko bar charts, comparable to 15-minute rotations but with bars derived by a totally different means than specific time-formed bars (or candlesticks). Like a habit, the minute chart was difficult to let go, but this week I began the transformation to only use renko bar charts for my intraday charts. A 15-minute chart vs a renko chart. A time chart and a renko chart side by side. So here’s a side-by-side view of the same low-to-high initiative move followed by a 78.6% retracement, forming a triangle, which I happen to use for harmonic patterns … but back to renko! The 15-minute chart had several rotations inside the initiative move from the 1747 low to the 1764 high, while the 6-tick renko bar chart shows “noise” removed in the initiative move. Once the bars turned green, the implication was to exit an existing short position, enter or stay in a long position. Wondering how the renko bar works? In a nutshell, it is of Japanese origin, and only has to do with price movement rather than time and or volume. It creates a new bar (originally called a “brick”) every time price moves beyond the top or bottom of a previous bar a predetermined amount. Now let’s look at how I like to use the larger-sized renko bar (previously a larger timeframe using minutes) and fine-tune entries and exits using a 2-tick renko bar in ESZ13 charts. The red arrow on the 6-tick chart is the conservative long entry once the bar turns green around 1755 region. The 2-tick chart triggers a change in momentum when the sub graph indicator has a fast line cross above a slow line. This is an aggressive entry; a conservative long entry is shown when there’s at least two green bars above the Bollinger Band midline. Renko charts show movement relative to a previous price, not movement over time. If the initial conservative opportunity to enter a long position was missed, there’s another opportunity to either enter or add to an existing position when 1) the fast line crosses back above the slow line and/or 2) when the green bars are back above the Bollinger Band midline. So whether you’re an aggressive trader, conservative trader or both, there are triggers for each style. As for risk, there are specifics that can be used for all styles of traders. When entering a long position, as long as the bars stay green the position is good for the ride. For more confirmation, as long as price holds above the Bollinger Band midline, even higher probability of staying in for a harmonic pattern target, or whatever is used for scaling or exits. Once price holds below the Bollinger Band midline accompanied by at least two red bars, it’s a probability that the move is shifting energy and it’s time to tighten the position, scale, or exit altogether. After several years as Senior Analyst for The Trading Book, Kathy's company, Structural Trading, offers education, premarket analysis videos and charts focusing on harmonic pattern trading. A previous lead trader in the MrTopStep IM-Pro Trading Room, she shared trading ideas and breaking market news as she traded live with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you. Post navigation. Leave a Reply Cancel reply. Delta Print Charts. Live Squawk. The information in these Market Commentaries do not constitute a solicitation of the purchase or sale of any futures or options contracts. Renko Charts. Table of Contents. Renko Charts. Introduction. Invented in Japan, Renko charts ignore time and focus solely on price changes that meet a minimum requirement. In this regard, these charts are quite similar to Point & Figure charts. Instead of X-Columns and O-Columns, Renko charts use price “bricks” that represent a fixed price move. These bricks are sometimes referred to as “blocks” or “boxes.” They move up or down in 45-degree lines with one brick per vertical column. Bricks for upward price movements are hollow while bricks for falling price movements are filled with a solid color (typically black). Construction and Characteristics. Renko charts are based on bricks with a fixed value that filters out smaller price movements. A regular bar, line or candlestick chart has a uniform date axis with equally spaced days, weeks and months. This is because there is one data point per day or week. Renko charts ignore the time aspect and only focus on price changes. If the brick value is set at 10 points, a move of 10 points or more is required to draw another brick. Price movements less than 10 points would be ignored and the Renko chart would remain unchanged. Using the S&P 500 10-point Renko chart as an example, a new Renko brick would not be drawn if the S&P 500 were at 1840 and advanced 9 points to 1849. If the S&P 500 then advanced to 1850 the very next day, a new Renko brick would be drawn because the entire move was at least 10 points. This brick would extend from 1840 to 1850 and be hollow, or white in this example. Alternatively, if the S&P 500 declined from 1840 to 1830, a new Renko brick would be drawn and it would be solid, or black in this example. The two charts above cover a six-month timeframe, but the Renko chart sports an irregular date axis and the price action is less choppy. This is because the S&P 500 Renko chart ignores price moves that are less than 10 points and remains unchanged until there is a move of at least 10 points. Close Versus High-Low Range. Renko charts can be based on closing prices or the high-low range by using the “field” setting in SharpCharts. Closing price means there is one data point per period and less volatility. The high-low range puts two data points into play and increases the fluctuations, which results in added bricks. The examples below show Renko charts for the S&P 500 and the box size is set at 10-points for both. The first chart is based on closing prices and the second is based on the high-low range. Notice that the Renko chart based on the high-low range fluctuates more than the close-only Renko chart. Fixed Value versus ATR. Chartists can use the “box” settings to set brick size as a specific value or as the Average True Range (ATR). A specific point value means brick size will remain constant even as new data is incorporated into the chart. In other words, new price data is added every trading day and the brick size will remain constant. The two charts above have a fixed value and each brick represents ten points. In contrast to fixed price bricks, brick size changes change when the ATR value is used. The default ATR is based on 14 periods and the Average True Range fluctuates over time. The brick size is based on the ATR value at the time the chart is created. Should the ATR value change the next day, then this new ATR value will be used to set the brick size. Also note that ATR values are based on standard charts, such as close-only, bar and candlestick. These charts have one data point per period and a uniform x-axis (date axis). The ATR value shown on these charts can differ from the ATR brick value on a Renko chart due to rounding issues. The next two examples show how the ATR value changes when the ending chart date changes. The first chart ends on June 10th and the ATR value is 12.05, which is the value for each Renko brick. The second chart ends on April 15th and the ATR value is 20.55, which is the value for each Renko brick. Notice how the brick value changed as the ATR value changed. The bricks on April 15th have a much higher value than the bricks on June 10th. Trends, Support and Resistance. White bricks form when prices rise a certain amount and black bricks form when prices decline a certain amount. The image below shows a daily S&P 500 chart with 10-point bricks and a 10-period simple moving average. Note that a 10-period moving average calculation is based on the last ten Renko values, not the last ten trading days. An indicator on a Renko chart is based on Renko values and will differ from the same indicator on a bar chart. Chartists can typically use shorter moving averages on Renko charts because smaller price movements have been filtered out. Chartists can use troughs to mark support levels and peaks to mark resistance levels. Chartists can also look for a two brick reversal to signal a trend change. Notice how the index fell with five black bricks in August and again in September-October. These declines looked like falling flags. A reversal occurred when two white bricks formed and broke above the short-term resistance level. Chartists can also apply the Fibonacci Retracements Tool to Renko charts. Conclusions. Like their Japanese cousins (Kagi and Three Line Break), Renko charts filter the noise by focusing exclusively on minimum price changes. Renko bricks are not added unless price changes by a specific amount. As with Point & Figure charts, it is easy to spot important highs and lows, and identify key support and resistance levels. Armed with this information, chartists can identify uptrends with higher highs and higher lows or downtrends with lower lows and lower highs. As with all charting techniques, chartists should employ other technical analysis tools to confirm or refute their findings on Renko charts. SharpCharts. Chartists can create Renko charts by going to the “Chart Attributes” section and selecting Renko as the chart “Type”. This section is just under the SharpChart on the left side. Users will then be able to choose between points or ATR, and then set the parameters for these two options in the next box. The “ATR” setting uses the Average True Range indicator from the symbol's underlying bar chart to determine an “Automatic” value for the Renko chart's box size. Note: This ATR value might change as prices change which can cause the Renko chart to change significantly whenever it is updated. The “field” can be set at close or high-low range. Chartists looking for more sensitivity can choose the high-low range. Chartists looking to focus on end-of-day price data can choose the close. The brick colors can also be changed using the “up color” and “down color” drop down menus just below the SharpChart. Click here for a live example. Note: If the phrase “AT LIMIT” appears at the top of a chart, it means that the box size specified would result in a chart that is too large for us to display. In that case, we increase the box size to the smallest size we can successfully display and add the “AT LIMIT” message to the top of the chart. Frequently Asked Questions. Q: Why are the Renko bricks changing on my chart? If you are using the ATR box size, the box size is computed automatically. However it may change during the day, so the chart may change along with it. Further Study. As the name implies, this book goes beyond candlesticks to show chartists other technical analysis techniques from the Far East. Nison devotes an entire chapter to Renko charts. Nison also covers Three Line Break charts, Kagi charts and explains how Japanese traders use moving averages.