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Key Takeaways
- Fixed-size Renko adds a brick when price reaches the next threshold; horizontal spacing represents brick sequence.
- Choose the box size, grid origin, price input and confirmation rule. ATR or percentage sizing also needs the platform’s update rule, because a recalculated box redraws bricks.
- In this standard construction, continuation is one box beyond the last brick close and reversal is two boxes in the opposite direction.
- One price observation can create several bricks. A remaining offset is measured from the last brick close rather than accumulated as path distance.
- Fix the box size, source and starting state, and completed prices rebuild the same bricks every time.
- Use brick levels for the signal rule and timestamped market prices for the entry, exit and holding-period calculation.
What is a Renko chart?
A Renko chart is a price chart built from equal-sized bricks that are added only when price moves a set amount, the box size, beyond the last brick. A new brick in the direction of the run needs a one-box move, while the first brick against it needs a two-box move. Each horizontal position is one brick, however long it took to form.
In the fixed-size construction here, each brick spans $2 and occupies one horizontal position. Source observations retain their timestamps, which supply elapsed time for the trading plan.
Renko construction: box size and two-box reversal
Choose box size, grid origin, price input and initial direction. Here the chart opens in an up run with the last brick closed at $48, so the next up brick completes at $50.
For an upward state, the next continuation closes one box above the last close. A downward reversal requires two boxes below it. The reverse rules apply in a downward state.
The first opposing brick begins one box away from the old close and ends two boxes away. It has the same one-box height as every other brick.
Formula
New brick with the trend: price moves ≥ 1 box beyond the last brick close. First brick against the trend: price moves ≥ 2 boxes from the last brick close. Box = a fixed price increment, or ATR(n) when the chart uses volatility sizing.- The fixed $2 example gives every brick a $2 body and uses one brick per horizontal position.
- The last brick close is the far edge of the most recent brick in the direction of the current run.
- The first opposing brick begins one box from the prior close and ends two boxes from it. The price threshold spans two boxes; the new brick itself spans one.
- ATR(n) is the Average True Range over n periods with Wilder smoothing: each new true range moves it 1/n of the way from the prior ATR. With volatility sizing, a 14-period ATR of $1.60 sets a $1.60 box.
- Compare each new source price with the state’s thresholds. A small change from $55.90 to $56.00 completes a $2 brick when the last up-brick close is $54.
Renko chart example: $2 bricks
A Renko chart on a stock near $50 with a fixed box size of $2.00. The last completed brick is an up brick spanning $52.00 to $54.00.
- Next up brick: $54.00 + $2.00 = $56.00, so a rally that stalls at $55.90 prints nothing
- Price runs to $60.40: bricks complete at $56.00, $58.00 and $60.00, three bricks stepping diagonally at one brick per column, and the last $0.40 stays unplotted
- First down brick: $60.00 − (2 × $2.00) = $56.00, a $4.00 give-back measured from the last brick close
- Measured from the $60.40 high, the first down brick arrives only after a $4.40 decline
- ATR sizing instead: a 14-period ATR of $1.60 sets the box at $1.60, so continuation needs $1.60 and reversal needs $3.20
The full figure has six up bricks followed by three down bricks. After the $60 brick close, the first down brick spans $58 to $56. That threshold is $4 below the last brick close and $4.40 below the $60.40 source observation.
Observations at $50, $52 and $54 create the first three up bricks. A later $55.90 observation adds none. The $60.40 observation creates three more bricks ending at $56, $58 and $60.
A retreat to $58.10 adds no opposing brick. Price is below the last $60 brick close while the chart remains in its upward state.
At $56, the first down brick spans $58 to $56. Subsequent observations at $54 and $52 add two more down bricks. The figure therefore contains six up bricks and three down bricks.
The first reversal threshold is $4 below the last brick close and $4.40 below the $60.40 high, so a long that waits for the first down brick gives back $4.40 from the high.
Why Renko thresholds use the last brick close
Thresholds use the last brick close. A $0.10 move from $55.90 to $56 completes a $2 brick when the current last close is $54.
The remaining distance is an offset from the grid, not a running sum of every back-and-forth price change. One observation can create multiple bricks without implying separate execution opportunities at each edge.
Renko source data, ATR sizing and repainting
This example builds from completed source observations with fixed $2 bricks. An OHLC or tick-based construction needs its own sequencing rule. A brick that forms before its source interval closes is a projection, so compare charts and act on completed bricks.
Fixed sizing keeps one increment. ATR and percentage modes derive it from extra inputs and a recalculation policy, so record those settings with the chart.
For a volume display, use the platform’s allocation rule and retain the original time-based activity for equal-time comparisons.
How traders use Renko charts
Use the Renko condition to activate a setup, then specify the order, invalidation, size and target from the market-price series. Point and Figure uses a related box system with several marks per column; Heikin Ashi transforms one candle per source interval.
Renko drops the clock, but an option runs on one: Options Flow shows when each large print hit the ticker, and the Options Profit Calculator shows the payoff at the brick target on each date before expiration.
Limitations of Renko charts
- Size the box to the move you trade. A larger box hides more movement, a smaller one adds noise, and ATR or percentage sizing can redraw bricks when it recalculates.
- Build the reversal lag into the exit plan. In the example, the first down brick needs a $4.40 decline from the $60.40 high.
- Brick edges are not trade prices. One observation can create several bricks, so fills and results must come from the market-price series.
- Read time and volume from the source series. A brick can take minutes or weeks, and any volume display depends on the platform’s allocation rule.
- Act on locked bricks. On platforms that build from bar closes, a projection brick stays provisional until the source interval ends.
Bottom line
A Renko chart filters price into equal bricks so runs and reversals stand out without the clutter of time-based candles. Fix the box size, source and initial state, use brick levels to define the signal, and plan entries, exits and holding time from the timestamped market prices behind the bricks.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Steve Nison, Beyond Candlesticks (Wiley, 1994), Renko Charts
- Fidelity Technical Indicator Guide: Average True Range
- Park and Irwin, What Do We Know About the Profitability of Technical Analysis? (Journal of Economic Surveys, 2007)
How entries are sourced, calculated and updated: editorial methodology.