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CHAPTER 14 - Charts > RENKO CHARTS
RENKO CHARTS
The name of this type of chart stems from the Japanese word for bricks, renga. Like point-and-figure and kagi, it also does not look at time as a factor. In a renko chart, a line (or “brick” as they’re called) is drawn in the direction of the prior move only if prices move by a minimum amount (i.e., the box size). The bricks are always equal in size. For example, in a five-unit renko chart, a 20-point rally is displayed as four five-unit-tall renko bricks. (See Figure 14.7.)
Basic trend reversals are signaled with the emergence of a new white or black brick. A new white brick indicates the beginning of a new uptrend. A new black brick indicates the beginning of a new downtrend. Since the renko chart is a trend-following technique, there are many times when renko charts produce whipsaws, giving signals near the end of short-lived trends. However, the hope of a trend-following technique is that it will allow you to ride the big uptrends and downtrends.