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. Trend

    The general direction of a market or of the price of an asset. ...
  2. Whipsaw

    A condition where a security's price heads in one direction, ...
  3. Kagi Chart

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

    A change in the direction of a price trend. On a price chart, ...
  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. What is the difference between a drawdown in banking and a drawdown in trading?

    The term "drawdown" appears in both the banking world and in the arena of trading, but it has completely different meanings ... Read Full Answer >>
  3. How can the exponential moving average be used in swing trading?

    The exponential moving average (EMA) is a variation of the simple moving average that places more emphasis on the latest ... Read Full Answer >>
  4. Why is the Triple Exponential Moving Average (TEMA) important for traders and analysts?

    The triple exponential moving average (TEMA) is important for traders and analysts because it is useful as a trend indicator. ... Read Full Answer >>
  5. Are exponential moving averages more effective than simple or weighted moving averages?

    An exponential moving average (EMA) uses an exponentially weighted multiplier to give more weight to recent prices, which ... Read Full Answer >>
  6. Why is trading volume important to investors?

    Trading volume, or volume, is the number of shares or contracts that indicates the overall activity of a security or market ... 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. Charts & Patterns

    Why These May Be the Top 4 Growth Stocks of 2015

    These four stocks have high upside potential in 2015.
  4. Chart Advisor

    Interested in Growth Stocks? See These 4 ETFs

    Given the rise in popularity of growth ETFs, there are several interesting growth stock choices for investors.
  5. Chart Advisor

    Watch Out For Falling Copper Prices

    Commodity traders have been turning their attention toward copper prices over the past several weeks.
  6. Chart Advisor

    Watch for Bullish MACD Crossovers in These Stocks

    These stocks are trending higher but recently experienced a pullback. Watch for a bullish MACD crossover to indicate upward momentum is continuing.
  7. Trading Strategies

    Bucking The Trend With Pattern Failure Strategies

    The best trade could be in the opposite direction when a classic price pattern doesn't behave according to ideal rules.
  8. Chart Advisor

    Buying Opportunities on Upside Wedge Breakouts

    Find buying opportunities in these stocks, which have seen their prices break out of long-term declining wedge patterns.
  9. Charts & Patterns

    Are These the Top Dividend Stocks of 2015?

    These dividend-paying companies offer a lot more than just dividends.
  10. Charts & Patterns

    Top 10 Alternative Energy Stocks for 2015

    As energy demands continue to rise, the alternative energy sector is heating up. Here are the top 10 promising alternative energy stocks for 2015.

You May Also Like

Hot Definitions
  1. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  3. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  4. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  5. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center