Renko Chart
A Renko Chart is a price-only charting method of Japanese origin that records price movement as fixed-size bricks — each new brick forming only when price moves by the predetermined brick size — eliminating time and minor fluctuations to display trend direction with exceptional clarity.
The word 'Renko' derives from the Japanese 'renga', meaning brick. The chart was developed in Japan alongside Kagi and Three-Line Break charts as an alternative to time-based candlestick charts. Its defining feature is that each brick has a fixed height equal to the brick size parameter, and a new brick appears only when price advances or declines by at least that full amount from the closing level of the most recent brick.
Brick orientation encodes direction: white or hollow bricks indicate upward movement; black or filled bricks indicate downward movement. Because each brick takes exactly the same number of price units to form, the chart represents pure price action without any time dimension — a period of strong trending will show many bricks forming in quick succession, while a quiet, oscillating market may show no new bricks for extended periods.
The brick size is the critical parameter. Too small a brick size closely approximates a regular candlestick chart and reintroduces noise. Too large a brick size produces very few transitions and lags so far behind price that signals arrive too late to be actionable. In practice, brick sizes for Nifty 50 index analysis range from 25 to 100 points depending on the trader's intended holding period; for individual mid-cap stocks, percentages of 0.5 to 2 percent of price are common.
ATR-based Renko charts adapt the brick size dynamically using the Average True Range, which makes the chart self-adjusting to changes in a stock's volatility regime. This is particularly useful on NSE-listed small-cap stocks where volatility can shift dramatically around earnings announcements.
Trend identification on Renko charts is straightforward: a consecutive sequence of bricks in one direction constitutes a trend; a reversal requires at least two bricks in the opposite direction with traditional Renko settings (though some implementations use a single opposite brick as a reversal trigger). Support and resistance levels appear as horizontal bands where the chart repeatedly stacked and reversed, as the fixed brick geometry creates natural alignment of price levels.
For intraday scalpers on NSE, one-point Renko charts on highly liquid futures contracts provide clean entry and exit signals that correspond to structural price changes rather than bid-ask volatility. The absence of time allows assessment of whether a trend is strong or weak based solely on the number and consistency of consecutive bricks.