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   Renko - Technical Analysis from A to Z     
RENKO

Overview

The Renko charting method is thought to have acquired its name from "renga" which is the Japanese word for bricks. Renko charts are similar to Three Line Break charts except that in a Renko chart, a line (or "brick" as they're called) is drawn in the direction of the prior move only if prices move by a minimum amount (i.e., the box size). The bricks are always equal in size. For example, in a 5-unit Renko chart, a 20-point rally is displayed as four, 5-unit tall Renko bricks.

Kagi charts were first brought to the United States by Steven Nison when he published the book, Beyond Candlesticks.


Interpretation

Basic trend reversals are signaled with the emergence of a new white or black brick. A new white brick indicates the beginning of a new up-trend. A new black brick indicates the beginning of a new down-trend. Since the Renko chart is a trend following technique, there are times when Renko charts produce whipsaws, giving signals near the end of short-lived trends. However, the expectation with a trend following technique is that it allows you to ride the major portion of significant trends.

Since a Renko chart isolates the underlying price trend by filtering out the minor price changes, Renko charts can also be very helpful when determining support and resistance levels.


Example

The following charts show Intel as a classic high-low-close bar chart and as a 2.5-unit Renko chart.


I drew "buy" and "sell" arrows on both charts when trend reversals occurred in the Renko chart. You can see that although the signals were late, they did ensure that you invested with the major trend.


Calculation

Renko charts are always based on closing prices. You specify a "box size" which determines the minimum price change to display.

To draw Renko bricks, today's close is compared with the high and low of the previous brick (white or black):

  • If the closing price rises above the top of the previous brick by at least the box size, one or more white bricks are drawn in new columns. The height of the bricks is always equal to the box size.

  • If the closing price falls below the bottom of the previous brick by at least the box size, one or more black bricks are drawn in new columns. Again, the height of the bricks is always equal to the box size.

If prices move more than the box size, but not enough to create two bricks, only one brick is drawn. For example, in a two-unit Renko chart, if the prices move from 100 to 103, only one white brick is drawn from 100 to 102. The rest of the move, from 102 to 103, is not shown on the Renko chart.

 


Renko Chart Patterns Stock Screener Action
 White Trend   Customize Screen   Backtest Screen   Trade Alert  
 Black Trend   Customize Screen   Backtest Screen   Trade Alert  
 Turnaround White Brick   Customize Screen   Backtest Screen   Trade Alert  
 Turnaround Black Brick   Customize Screen   Backtest Screen   Trade Alert  
 Double Top   Customize Screen   Backtest Screen   Trade Alert  
 Double Bottom   Customize Screen   Backtest Screen   Trade Alert  
 Head and Shoulders   Customize Screen   Backtest Screen   Trade Alert  
 Inverted Head and Shoulders   Customize Screen   Backtest Screen   Trade Alert  
 Triple Bottom   Customize Screen   Backtest Screen   Trade Alert  
 Triple Top   Customize Screen   Backtest Screen   Trade Alert  
 Ascending Triangle Breakout   Customize Screen   Backtest Screen   Trade Alert  
 Descending Triangle Breakout   Customize Screen   Backtest Screen   Trade Alert  
 Symmetrical Triangle Bullish Breakout   Customize Screen   Backtest Screen   Trade Alert  
 Symmetrical Triangle Bearish Breakout   Customize Screen   Backtest Screen   Trade Alert  

 

 Preface
Preface
Introduction
Acknowledgments
Terminology
To Learn More


 Content
Technical Analysis
Price Fields
Charts
Support & Resistance
Trends
Moving Averages
Indicators
Market Indicators
Line Studies
Periodicity
The Time Element
Conclusion

 Reference
 Reference
 Absolute Breadth Index
 Accumulation/Distribution
 Accumulation Swing Index
 Advance/Decline Line
 Advance/Decline Ratio
 Advancing-Declining Issues
 Advancing, Declining,
   Unchanged Volume

 Andrews' Pitchfork
 Arms Index
 Average True Range
 Bollinger Bands
 Breadth Thrust
 Bull/Bear Ratio
 Candlesticks, Japanese
 CANSLIM
 Chaikin Oscillator
 Commodity Channel Index
 Commodity Selection Index
 Correlation Analysis
 Cumulative Volume Index
 Cycles
 Demand Index
 Detrended Price Oscillator
 Directional Movement
 Dow Theory
 Ease of Movement
 Efficient Market Theory
 Elliott Wave Theory
 Envelopes (Trading Bands)
 Equivolume
 Fibonacci Studies
 Four Percent Model
 Fourier Transform
 Fundamental Analysis
 Gann Angles
 Herrick Payoff Index
 Interest Rates
 Kagi
 Large Block Ratio
 Linear Regression Lines
 MACD
 Mass Index
 McClellan Oscillator
 McClellan Summation Index
 Median Price
 Member Short Ratio
 Momentum
 Money Flow Index
 Moving Averages
 Negative Volume Index
 New Highs-Lows Cumulative
 New Highs-New Lows
 New Highs/Lows Ratio
 Odd Lot Balance Index
 Odd Lot Purchases/Sales
 Odd Lot Short Ratio
 On Balance Volume
 Open Interest
 Open-10 TRIN
 Option Analysis
 Overbought/Oversold
 Parabolic SAR
 Patterns
 Percent of Resistance
 Percent Retracement
 Performance
 Point & Figure
 Positive Volume Index
 Price and Volume Trend
 Price Oscillator
 Price Rate-of-Change
 Public Short Ratio
 Puts/Calls Ratio
 Quadrant Lines
 Relative Strength, Comparative
 Relative Strength Index
 Renko
 Speed Resistance Lines
 Spreads
 Standard Deviation
 STIX
 Stochastic Oscillator
 Swing Index
 Three Line Break
 Time Series Forecast
 Tirone Levels
 Total Short Ratio
 Trade Volume Index
 Trendlines
 TRIX
 Turn Price
 Typical Price
 Ultimate Oscillator
 Upside/Downside Ratio
 Upside-Downside Volume
 Vertical Horizontal Filter
 Volatility, Chaikin's
 Volume
 Volume Oscillator
 Volume Rate-of-Change
 Weighted Close
 Williams' Accumulation/Distribution
 Williams' %R
 Zig Zag

 Author
Bibliography
About the Author

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