Renko Chart

AAA

DEFINITION of 'Renko Chart'

A type of chart, developed by the Japanese, that is only concerned with price movement; time and volume are not included. It is thought to be named for the Japanese word for bricks, "renga". A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down. This type of chart is very effective for traders to identify key support/resistance levels. Transaction signals are generated when the direction of the trend changes and the bricks alternate colors.

Renko Chart

INVESTOPEDIA EXPLAINS 'Renko Chart'

For example, a trader will sell an underlying asset when a black brick is placed at the end of series of climbing white bricks. Since this type of chart was designed as a way to follow the general price trend of an asset, there can often be false signals where the color of the bricks changes too early, producing a whip-saw effect.

RELATED TERMS
  1. Whipsaw

    A condition where a security's price heads in one direction, ...
  2. Trend

    The general direction of a market or of the price of an asset. ...
  3. Reversal

    A change in the direction of a price trend. On a price chart, ...
  4. Kagi Chart

    A type of chart developed by the Japanese in the 1870s that uses ...
  5. Reversal Amount

    The amount of price movement required to shift a chart to the ...
  6. Line Chart

    A style of chart that is created by connecting a series of data ...
RELATED FAQS
  1. How do experienced traders identify false signals in the market?

    Experienced traders often use multiple technical indicators and theories for market analysis to develop trading strategies. ... Read Full Answer >>
  2. How do I Implement a Forex Strategy when spotting a Sanku (Three Gaps) Pattern?

    A forex trading strategy can easily be implemented to profit from a market reversal signal that comes from the sanku, or ... Read Full Answer >>
  3. How can I profit from monitoring open interest?

    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  4. How is liquidity risk captured by the cash conversion cycle (CCC)?

    Liquidity risk is captured by the cash conversion cycle (CCC) through the use of days inventory outstanding, days sales outstanding ... Read Full Answer >>
  5. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  6. How do I perform a financial analysis using Excel?

    Investors can use Excel to run technical calculations or produce fundamental accounting ratios. Corporations use Excel to ... Read Full Answer >>
Related Articles
  1. Active Trading

    Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.
  2. Bonds & Fixed Income

    Dragons, Samurai Warriors And Sushi On Wall Street

    From samurai to sushi, there's no denying the East Asian influence on investing terminology.
  3. Trading Strategies

    Pros & Cons Of Day Trading Vs Swing Trading

    Day trading involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems. Swing trading is based on identifying swings in stocks, commodities, ...
  4. Charts & Patterns

    The 6 Most Profitable Grocery Stores

    These are the six largest grocery store chains operating in the United States.
  5. Chart Advisor

    Trade These Stocks on a Re-test of Breakout Level

    You can't always catch the breakout. If you miss it, you can still get in. Here are 4 stocks to watch for your "second chance" entry.
  6. Chart Advisor

    Cup and Handle Chart Patterns Forming Right Now

    A cup and handle is a relatively common chart pattern which can be used in various ways. Here it highlights stocks poised to make new highs.
  7. Technical Indicators

    6 Stocks for Millennials (or Anyone)

    Savvy Millennial investors looking for long-term winners should take a look at these stocks.
  8. Chart Advisor

    Long-Term Charts Suggest The Next Move Is Downward

    It is often a strategic move to remove oneself from the daily fluctuations and to broaden the time horizon to get a better idea of the long-term trend.
  9. Chart Advisor

    Silver Stocks Facing Major Resistance

    Active traders in the commodity markets are taking note of silver.
  10. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center