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The renko chart is a very excellent and effective tool for determining a development in the economic market, and many forex traders make use of it. The word "Renko" comes from "Renga", the Japanese word for "Brick". The square boxes that make up a Renko chart are often referred to as "bricks. Renko charts are "time independent" charts that do not have constantly spaced time axes. Renko charts are based on closing prices or on highs and lows of the period. We decide to base our own charts on the highs and lows of the period. This type of chart retains a pre-determined "Brick Size" that is used to determine when new bricks are added to the chart. If prices move more than the Brick Size above the top (or below the bottom) of the last brick on the chart, a new brick is added in the next chart column. Blue bricks are added if prices are rising. Red bricks are added if prices are falling. Only one type of brick can be added per time period. Bricks are always with their corners touching and no more than one brick may occupy each chart column. Suppose price falls lower below the bottom of the previous brick by at least the box size, one or more red bricks are drawn in new columns and if price rises above the top of the previous brick by at least the box size, one or more blue bricks are drawn in new columns. The height of the bricks is always equal to the box size. If prices move more than the brick size, but not sufficient to create two bricks, only one brick is drawn. The renko chart is best used as a trend-follow-ing technique; there are times when they produce whipsaws, giving signals near the end of short-lived trends. Unfortunately no individual can control that and that happens to be the nature of the market. Renko charts are easier to understand and trade when compared to other charts out there.
For more information about renko charts, strategy and how to profitably trade them visit renko trade blog.
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