Demystifying the Renko Chart: Creation and Configuration in TradingView

Technical analysts have a diverse toolkit for dissecting price movements. Among these tools, Renko charts stand out for their focus on price volatility rather than time. This article will guide you through creating and configuring Renko charts on the popular platform, TradingView.

Understanding Renko Charts

Before diving in, let's establish the core principle of Renko charts. Unlike traditional bar charts that reflect price movement within a specific timeframe (e.g., hourly, daily), Renko charts focus solely on price movement exceeding a predefined threshold. These thresholds are called "brick sizes" and determine the size of each block (brick) on the chart.

• Upward Brick: A new upward brick is formed only when the price closes a specific amount (brick size) above the previous brick's high.
• Downward Brick: Conversely, a downward brick appears when the price closes a set amount (brick size) below the previous brick's low.

This visual representation aims to filter out minor price fluctuations, allowing traders to concentrate on significant price trends.

Creating a Renko Chart in TradingView

TradingView offers a built-in functionality to create Renko charts. Here's a step-by-step guide:

1. Select your instrument: Open the chart of the financial instrument you want to analyze (stock, forex pair, etc.).
2. Change the Chart Type: Locate the chart type dropdown menu (usually found on the top left corner). Click on it and select "Renko" from the available options.

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Configuring Your Renko Chart

TradingView provides several options to customize your Renko chart for a personalized trading experience. Let's explore some key configurations:

• Box Size Assignment Method: This setting determines how the size of each brick is calculated. You have three choices:
  • ATR (Average True Range): This method uses the Average True Range indicator to dynamically adjust the brick size based on recent price volatility.
  • Traditional: This method sets a fixed brick size you define manually.
  • Percentage (LTP): This option allows you to define the brick size as a percentage of the Last Traded Price (LTP).
• ATR Length: If you choose ATR as the box size assignment method, this setting determines the look-back period used to calculate the ATR. The default value is 14 periods.
• Source: You can choose between "Close" (using the closing price for brick formation) or "OHLC" (using the entire Open, High, Low, Close range for brick formation).
• Brick Colors: TradingView allows customizing the colors of up and down bricks, along with projection bricks (used for visualization purposes).

Additional Tips for Using Renko Charts

• Brick Size Selection: The choice of brick size significantly impacts the chart's appearance and potential trading signals. Experiment with different brick sizes to find one that suits your trading style and timeframe.
• Combine with Other Indicators: While Renko charts provide valuable insights, consider using them alongside other technical indicators for a more comprehensive analysis.
• Backtesting Strategies: TradingView allows backtesting your trading strategies on Renko charts. This helps evaluate the effectiveness of your approach before risking real capital.

Conclusion

Renko charts offer a valuable tool for technical analysis by focusing on price movement rather than time. With TradingView's user-friendly interface, creating and configuring Renko charts is a breeze. Remember, mastering any technical tool requires practice and experimentation. So, dive into the world of Renko charts, and see if they enhance your trading decisions!