Renko charts — a price-based brick chart, not a time-based one

There is a type of chart that pays no attention to the clock at all. It does not draw a new candle every minute or every hour — it waits until price has genuinely travelled a set distance, and only then adds another brick. That is exactly how Renko works: instead of candles you get even rectangles, and each one stands for the same, predefined move in price. For anyone drowning in the noise of a five-minute chart, that picture of the trend can be surprisingly clean and calming.

What a Renko chart is and where it came from

Renko is a Japanese charting technique based on price rather than time. The name comes from the Japanese word "renga", meaning brick, because the chart really does look like a diagonal wall of blocks. Each brick has a fixed size, say ten pips on EUR/USD. A new brick in the trend direction forms only once price has travelled the full ten pips beyond the previous one; as long as it merely twitches inside, nothing happens on the chart. That is the first and most important feature of the method: by design it ignores small swings and shows only moves of a set minimum size.

In the West the technique was popularised by Steve Nison in his 1994 book "Beyond Candlesticks" — the same book that also brought us Kagi and candlestick charts. Nison described Renko as a tool for isolating the trend and marking support and resistance, not for catching every move. It is worth remembering that before you start expecting a signal from the bricks every few minutes.

How brick size and the reversal rule work

"Renko charts are excellent for determining support and resistance levels, and buy and sell signals are generated when the colour of the bricks changes." — Steve Nison, Beyond Candlesticks, John Wiley & Sons, 1994

Trend continuation is simple. When the last brick is an up brick and price clears its high by a full brick size, you add another one upward, usually in a light colour. The same works downward, in a dark colour. A sequence of five or six bricks of the same colour is just a healthy, one-directional trend in which price adds a fresh high or low again and again.

The whole lens of the method sits in the reversal rule. To change the chart's direction, price cannot step back by a single brick — it has to travel the distance of two bricks the other way. If a brick is ten pips, drawing the first down brick after an up run takes a full twenty pips of downward movement. That double threshold is deliberate: it is exactly what strips out the shallow pullbacks that look like the start of a reversal on an ordinary chart but turn out to be merely a breather in the trend.

You can set the brick size in two ways. The first is a fixed value, say ten or twenty pips — simple and predictable, but the same pip count cannot sensibly be used on a quiet EUR/USD and on a wild GBP/JPY. The second is a brick derived from current volatility, most often as a fraction of the ATR — then the threshold widens on its own when the market speeds up and shrinks when it calms down. A small brick lets more noise through and gives more signals; a large brick gives a cleaner trend but reacts more slowly. It is always a trade-off you tune to the pair and the timeframe.

How to read and use this chart step by step

Step 1 — set the chart and the right timeframe

In TradingView select the Renko chart type and set the brick size. MetaTrader’s standard chart menu offers bars, candles and lines; Renko requires an additional implementation whose construction rules you must check — to begin with a fixed value of around ten or twenty pips for a major pair is enough, and later you can switch to the ATR variant. If you have only ever used candles, it helps to refresh the broader technical analysis foundations first, because Renko runs on a different logic than the classic time axis. The method is a slow filter, so it makes sense on the daily and weekly timeframe rather than on five minutes.

While you are there, check what the platform builds the bricks from. Classically they are computed from the closing prices of the source timeframe — which means that choosing M15 rather than H1 as the source genuinely changes how the chart looks. Some programs let you build bricks from ticks, that is from every change in price, and such a chart will show reversals that the close-based version simply never notices. This is not a cosmetic detail: the same pair over the same period can look entirely different after one setting is changed, and along with the appearance the history of signals changes too — the very history on which you judge the method. So before you compare two settings, make sure you are comparing the same thing.

Step 2 — read direction from colour and sequence

Count how many of the last bricks share the same colour. A long, uniform run is a clear trend and a cue to look for trades aligned with its direction. A single brick in the opposite colour after a long run is only a candidate for a change, not a certainty — remember that for it to appear, price already had to travel two full bricks.

Step 3 — wait for a confirmed colour change

Do not front-run the rule. The first brick in the opposite colour appears only after a full two-brick move, and the freshly drawn last brick can still repaint until price finally completes that distance. The entry is late by definition, but it has a real break behind it rather than a guess.

Entry, stop and targets — an illustrative example

Let us go back to the situation in the table. When price drops below 1.0930 and the first dark brick forms, you have a confirmed change of direction and can consider a short position aligned with the new trend. The stop loss naturally goes above the high of the last light brick, around 1.0950: if price climbed back above that level the reversal would be invalidated and the whole premise would vanish. With an entry around 1.0930 that means roughly twenty pips of risk, which is exactly the size of the reversal threshold — a permanent feature of the method rather than a quirk of this example. You can set the target at the previous support, or hold the position until the chart draws a brick in the opposite colour — that is, until the method itself signals the end of the move, which amounts to a convenient, mechanical trailing stop.

One caveat matters more here than it looks. Bricks are a drawing, not the market: their edges fall on calculated, round values, while your order is filled at the real price on the platform, widened by the spread and any slippage. So write the entry level and the stop loss down as specific rates, not as "the end of the third brick". The protective order itself is mandatory, because the colour change that gave you the signal may turn out to be a single flicker inside a consolidation.

Watch out for two traps. First, a Renko chart shows neither time nor volume, so how many days the move lasted and how heavily it was backed is something you have to learn from another source. Second, because the reversal threshold spans two bricks, the stop can be wide, and that is a real cost you have to price into your position size. The numbers above are illustrative only and show the logic of the approach, not a market forecast.

Strengths and weaknesses you need to know

The biggest strength of Renko is a clean picture of the trend. The chart filters out most of the noise and shows only moves of a set minimum size, so the market's direction is visible almost at a glance, and the horizontal rows of bricks reveal support and resistance beautifully. It is a tool that cools the emotions and makes it harder to enter random swings.

The weaknesses are just as clear, though. First, the lag — by the time the two bricks needed for a reversal have formed, part of the move is already behind you. Second, the lack of a time axis and volume, which costs you the information about how long and how intensely the market moved. Third, the repainting of the last brick until price completes the full distance. Fourth, behaviour in a sideways trend: when the market sits in a narrow range, the bricks can flicker up and down, producing a string of false reversals — the classic whipsaw. That is why it is sensible to keep Renko next to an ordinary time-based chart: one shows the trend backdrop, the other gives entry precision and the full context that a price-only chart, by its nature, does not show.

How it compares with Kagi, Three Line Break and Heikin-Ashi

Renko does not work in a vacuum — it belongs to a family of techniques that try, by different routes, to quiet the market's noise. It is closest to Three Line Break charts, which also ignore time, except that their reversal threshold is built into the structure: a new line in the opposite direction is drawn only when price breaks the extreme of the last three lines, not after a fixed distance in pips. Kagi charts go further toward price and additionally encode the strength of supply and demand in the thickness of the line, which Renko does not do. The Heikin-Ashi technique is the gentlest relative, because it remains a time-based chart — it merely averages the open and close to smooth the candles, without abandoning the time axis. The practical difference is that Renko rests its entire filter on one parameter: the brick size. Set it too small and the noise returns; set it too large and the lag returns. That makes Renko the most "tunable" tool of the four, but also the most dependent on getting that setting right.

What to do tomorrow to get comfortable with Renko

1. Open any major currency pair in TradingView on the daily timeframe, switch the chart type to "Renko" with a ten-pip brick, and compare the same period with the candlestick chart — you will see for yourself how many small swings the method simply skipped over and how much clearer the trend became.
2. Switch the brick mode from a fixed pip count to a value derived from the ATR and trace on historical data how the threshold widens on its own in choppy periods and shrinks in calm ones — that is the best way to feel the difference between a fixed and a dynamic brick.
3. Find a stretch of clear consolidation on the chart and count how many false colour changes appeared inside the narrow range, so you experience first-hand why Renko whipsaws an account in a sideways trend and when it is better to set it aside.
4. Set up a simple journal in a spreadsheet with columns for the signal date, the direction, the brick size, the stop loss above or below the last brick, and the result, and fill it in after every trade you take on a demo account before you move to a live one.
5. Pair Renko with an ordinary time-based chart of the same pair: let the price version define the trend backdrop along with support and resistance, while the candlestick chart handles precise entry and shows the time and volume that the bricks do not contain.