Renkotraders.com

Types of Renko Charts – Read Renko Charts more accurately

Posted by on   |   5 Comments »

Renko charts, despite their simplicity can be disastrous if a trader does not have a proper understanding of how the Renko charts’ boxes are plotted. In the previous article, I mentioned how Renko charts can be configured based on the box size. In this article, I will show you how to read the Renko charts. By the end of the article, you will learn how the Renko boxes are plotted on the chart, regardless of the charting or trading platform that you use.

Types of Renko Charts

There are two primary ways how Renko charts are plotted. Let’s explore these two types of Renko charts and see how the Renko chart is plotted differently.

  • Period Close
  • Price movement

The table below shows a summary of differences between the two types:

Period Close Price Movement
Plots Renko box based on closing price of the period (H1, H4, D1) Plots Renko box based on price movement
More suitable for long term trade and technical analysis Best works with short term markets
Indicator based trading shows considerable lag Indicator based trading is more suited
Similar to swing trading  Similar to scalping

Period Close – Renko Charts

The Period close type of Renko chart is considered to be the more traditional approach to plotting Renko charts. In this type, a Renko box is plotted based on the closing price of a period that you select. The most common period selected is the Daily chart, but it can also be configured to a H4 or H1 closing prices as well. The irony here is that despite the fact that Renko charts are not time dependent, the closing prices are. However, in ranging markets when price fails to close “x” pips to print a new Renko box, traders will find the difference.

The best way to illustrate the Period Close type of Renko chart is with an example.

The following chart below from Tradingview.com plots the Renko boxes based on the daily close (it can also be configured to H4 or H1 close as well, but requires a subscription).

The chart below shows the EURCAD Renko Chart, configured to a 50 pip close. The Renko box of interest is the one marked with an open/close of 1.41299 and 1.40799.

Renko Chart based on period close

Renko Chart based on period close

If we compare this price level with a traditional candlestick chart, we can see how the Renko chart is plotting prices.

Daily Close - Candlestick Chart

Daily Close – Candlestick Chart

Here, we notice that the bearish Renko bar was plotted after the bearish long candlestick closed below 1.40799. The second candle with a small body closed back above 1.40799. The high was almost the same 50 pip move, but the Renko chart did not plot a new bullish Renko brick as we would need a 100 pip move to plot the reversal brick on Renko charts.

Despite the fact that price reversed again below 1.41299, there was no new Renko brick formed.

Price Movement – Renko Charts

In this type of Renko charting, Renko charts are not dependent on closing prices but rather on the price move itself. For example, for every 50 pip move a new Renko brick is plotted, regardless of the closing price. This method of Renko charting gives rise to many Renko bricks and is more dynamic in nature as it is calculated on price movements rather than closing price.

The chart below shows the regular candlestick chart (daily) for USDCAD. The two price levels of interest are 1.096 and 1.0935. Notice how price has been mostly ranging in the traditional chart.

Regular Candlestick Chart

Regular Candlestick Chart

The next chart below shows the USDCAD 5pip Renko box. Here, we notice how the Renko bricks have been plotted, every time price moved back and forth 5 pips within the 25 pip range.

Renko Chart based on price movement

Renko Chart based on price movement

Renko Charting Types – Does it really matter?

Yes, it actually does. The price movement based Renko charts plot differently compared to a period close type of Renko chart plotting. This means technical analysis and especially indicator based Renko trading systems will differ vastly with the above two types of Renko charting.

However, the differences between these two types of Renko charts do mean that traders can scalp the markets. Obvious from the differences, the price movement type of Renko charts can be used for scalping purposes, whereas the period close type of Renko charts is somewhat akin to trading based of daily closing price for example, ideally suited for swing traders.

It is unfortunate that most traders who claim to trade with Renko charts fail to recognize this simple yet trade altering truth about Renko charts.

The next time you open your Renko charts, spare a few minutes to figure out how your charting or trading platform is calculating the Renko boxes which would help in approaching the markets accordingly.

  • Hazmil Jainal

    What software or website do you suggest for price movement renko bars

    • Take a look here for different renko software that I keep reviewing from time to time. You can pick and choose one depending on whether you want a paid/free version or depending on what market you want to trade.

  • Hazmil Jainal

    Hey i am sorry but i am getting quite confuse. Hope you can help me out. Dynamic renko works off the price regardless of the closing prices (i am assuming that that means it works by achieving the pips through number of trades or tick data).

    I was looking at your reviews where you menion that protrader can do a dynamic renko off a 1 minute data. Does that mean it take data off the 1 min close or are you saying that every 1 min, where the price moves, the renko is formed based on box size.

    I have been reading your reviews and truly appreciate your effort in giving in depth explanation but i still dont quite seem to know a good price movememt renko software.

    I am using a paid version of trading view at the moment working off a 4 hour chart. Sometimes in a down trend, there is spike up high but still closes low and a price movement renko will help me capture this move for scalping.

    • None of the trading platforms can build Renko bricks based off tick data. Therefore, you will find M1 as the closest time frame (or an alternative to tick data). Read this article which explains how the M1 and other base time frame data influences the Renko bricks.

  • Hazmil Jainal

    Is price movement based on a 1 min chart or tick basis(number of trade)

Shares