BUILDING A CHART "BRICK BY BRICK"

What is it Renko?
Renko charts were invented in Japan, just like regular candlesticks, many years ago and they are called Renga, which means "brick". They display charts symmetrically and are effective for identifying major trends and structural support and resistance levels. Renko charts are very well suited for trend trading as they are visually appealing, making it easy to screen out noise and highlight trends easily.

Renko charts show a trend in a way that bars and candlesticks charts cannot. They are able to filter out the noise and create the sameness underlying the trend. In order to understand what a Renko is, let's remember what candlesticks show on our charts? They are the fluctuations in the price of a particular currency pair over a certain period of time: price and time.

The main difference is that Renko charts show only the change in price, neither trading volumes nor time intervals are taken into account in their development. The principle of building Renko bricks is based, as already mentioned, only on price fluctuations. In order for the chart to be displayed correctly, first of all, it is necessary to set the size of one brick. For example, many traders use a simple rule: 1 brick equals 10 pips. In other words, for a new brick/block to appear on the chart, the price must change by at least 10 points.

Candlestick chart:

Renko bars:

This is the feature of the Renko chart: it is extremely smooth and clear. All blocks have the same size. At the same time, if the price has changed by only a few points, it will not be displayed on the chart.

There are two types of brick size assignment methods: traditional and ATR-based. It measures the volatility of the asset, i.e. the values will be different at different periods of the trading period and on different time intervals. If you use this method, the value of the Renko bar should be equal to the ATR value.

Main Advantages and Disadvantages
Like any other graphical display of price changes, Renko has its pros and cons.

Advantages of Renko:
• This principle of construction allows to eliminate almost all noise from the chart as mentioned above.
• Renko shows itself perfectly in work with most indicators. Let's remember the main problem of some popular indicators - they output data with some delay (information is substituted into the formula only after the candle is closed). And since Renko is not tied to time, the indicator displays more real information as a result.
• Renko indicators show themselves perfectly in intraday trading. The trader does not need to wait for the candle to close.


The Main Disadvantages of Renko are as Follows:
• The chart does not work with most volume indicators.
• A new brick is built only when the trend increases/decreases by a certain number of points (which is equal to the size of one block). That is, the chart can remain unchanged for a long time if the market is consolidating.
• Renko chart does not show consolidation and impulse moves as seen on regular charts.
• In order to be aware of the likely measurement of trend direction, it is necessary to constantly monitor the market with other charts.

Examples
We will use a simple strategy based on the moving average with a period of 20 on the 15 minute timeframe. The sell and buy signal will be pinbar. Enter the trade when the pinbar is created near the moving average. Of course you can create your own strategy. You just need to spend some time with the chart and you will know if it will work for you or not.

EURAUD
USDJPY
GBPUSD (Sometimes Renko chart gives really beautiful and clear signals.)

Conclusion
Renko charts are quite convenient and practical because they display symmetrical candles and are effective for identifying major trends, support and resistance levels by filtering out noise. They can also be used in combination with other indicators to improve trading results. Renko charts allow you to identify various reversal patterns and see price structures in the market. However, they are mainly suitable for intraday trading.