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 >>
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

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  4. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  5. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  6. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  7. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  8. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  9. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  10. Trading Strategies

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center