Renko Charts: How They Work and How to Automate a Renko Strategy
A Renko chart plots price as a series of equal-sized bricks and ignores time completely. A new brick is drawn only when price moves a fixed amount (the brick size) beyond the last brick, so small wiggles disappear and trends stand out. Traders use Renko to read trend direction, spot reversals and build simple, rule-based entries and exits.
How Renko bricks work, why brick size matters, and how to automate a Renko rule, in 3 minutes. हिन्दी में देखें: Renko charts आसान भाषा में, और इन्हें automate कैसे करें, 3 मिनट में
How a Renko chart is built
Renko takes its name from renga, the Japanese word for brick. Each brick has the same height. You choose that height before you draw the chart:
- Pick a brick size, for example 10 points.
- Draw an up (green) brick each time the close rises 10 points above the top of the last brick.
- Draw a down (red) brick each time the close falls 10 points below the bottom of the last brick.
- For a reversal, price must clear the opposite edge of the last brick by a full brick size. After a green brick from 130 to 140, the next red brick needs a close at or below 120, a 20-point fall from the top.
- Ignore everything in between. A 7-point move up and back produces nothing.
Here is the same price path shown as a normal line chart and as Renko bricks:
The same hypothetical prices as a line (left) and as 10-point Renko bricks (right)
Twenty-eight closes become eight bricks. The fall from 143 to 108, which looks dramatic on the line chart, shows up as just two red bricks, and the uptrend on either side is obvious.
Choosing the brick size
Brick size decides everything a Renko chart shows you. There are three common ways to set it:
| Method | How it works | Good for |
|---|---|---|
| Fixed points | A set number of points, e.g. 10 on NIFTY | One instrument you know well |
| Percentage | A share of price, e.g. 0.1% of the index level | Comparing instruments at very different prices |
| ATR-based | Brick = the Average True Range over N periods | Letting bricks widen in volatile markets and shrink in calm ones |
A quick way to sanity-check a fixed size: compare it with how far the instrument usually moves in your trading window. If NIFTY typically travels a couple of hundred points in a session, a 10-point brick gives you plenty of bricks to work with, while a 100-point brick may print only a handful a day.
Renko vs candlestick vs Heikin-Ashi charts
All three charts can be drawn from the same price data. They differ in what they keep and what they throw away.
| Candlestick | Heikin-Ashi | Renko | |
|---|---|---|---|
| X-axis | Time | Time | Price moves (no time) |
| Each unit shows | Open, high, low, close of a period | Averaged open/close, smoothed | A fixed price move |
| Noise | All of it | Reduced by averaging | Filtered by brick size |
| Exact highs and lows | Yes | No (averaged) | No |
| Signal speed | Fastest | Slight lag | Lags by up to a brick |
| Best for | Precise entries, patterns | Riding trends with fewer colour flips | Clean trend and reversal rules |
Candlesticks show everything: the open, high, low and close of every period, so you see each spike and wick. That detail is useful for precise entries and a nuisance when you are trying to see the trend.
Heikin-Ashi sits in the middle. Its candles are calculated from averages of the current and previous candle, so colours flip less often, but it still runs on a time axis and its prices are not the real traded prices.
Renko removes time and keeps only moves of at least one brick. It is the cleanest of the three for trend-following rules and the least precise for exact price levels.
Pros and cons of Renko charts
Pros
- Filters out small moves, so trends and reversals are easier to see
- Support and resistance levels show up as clean horizontal edges
- A reversal needs a two-brick move, which cuts down whipsaw signals
- Rules are simple and objective, which makes them easy to automate and backtest
Cons
- Signals lag: a brick only completes after the full move has happened
- Exact highs and lows are lost if price reverses before completing a brick
- Time is hidden, so you can't tell a fast move from a slow grind
- Results depend heavily on brick size; a size that worked last year may not suit today's volatility
A simple Renko trend strategy
Here is a basic trend-following rule set to show how Renko logic turns into a strategy. It is a starting point to backtest, not a recommendation.
Why two bricks for entry and one for exit? Waiting for two bricks of the same colour filters out one-brick blips. Exiting on the first opposite brick keeps the loss on a failed trend to roughly two brick sizes, because a reversal brick already requires a two-brick move.
You can build on the same skeleton:
- Add a filter. Only take longs when price is above a moving average or a Supertrend on a normal time chart.
- Use indicators on the bricks. Moving averages, MACD or Supertrend calculated on Renko bricks react to brick closes instead of time.
- Trail the stop. Move the stop up one brick each time a new green brick forms. That is a trailing stop loss measured in bricks.
How to automate a Renko strategy on Tradetron
Watching for brick completions all day is tedious, and a missed brick is a missed exit. A Renko rule is exactly the kind of logic a computer applies better than a person.
If you are new to building conditions, start with keywords in Tradetron and how to evaluate a strategy's performance once your backtest is done.
Frequently asked questions
What are Renko charts used for?
Renko charts are used to see the trend clearly by ignoring time and small price moves. Traders use them to spot trend direction, reversals, and support and resistance levels, which show up as flat brick edges. They also make it easy to write objective rules, such as "enter after two green bricks".
Which brick size or timeframe is best for Renko?
There is no single best size. It depends on the instrument and how long you hold trades. Short-term traders use small bricks built from 1- to 5-minute candles; swing traders use larger bricks built from hourly or daily candles. ATR-based bricks adjust to volatility automatically. Backtest a few sizes before settling on one.
Is Renko good for intraday trading?
It can be. Small bricks on 5-minute candles give intraday traders a clean view of the trend without the noise of 1-minute candles. The trade-off is lag: every signal comes after a full brick has formed, so set brick size with your stop distance in mind.
Is Renko good for scalping?
Only with care. Scalping needs fast signals and tight stops, and Renko always waits for a full brick. Very small bricks give quicker signals but bring back the noise Renko is meant to remove. Many scalpers use Renko as a trend filter and time their entries on a regular chart.
What is the main disadvantage of Renko charts?
Lag, and the loss of detail. A brick forms only after the whole move is done, and if price reverses before completing a brick, that high or low never appears on the chart. Renko also hides how long a move took.
Can I automate a Renko trading strategy?
Yes. On Tradetron, Renko, Renko - closed candle and Renko dynamic bricks are available as keywords in the no-code strategy builder. You can write brick-based entry and exit conditions, backtest them on historical data and run them Live Offline before trading with real money.
