Renko on Candlesticks


This article refers to my trading endeavour and may be only interesting to people who has a decent level of knowledge in that space

A Renko chart is built using price movement ignoring standardized time intervals. It is thought to be named after the Japanese word for bricks, “renga,” since the chart looks like a series of bricks. A new brick is created when the price moves a specified price amount, and each block is positioned at a 45-degree angle (up or down) to the right of the prior brick.

Renko charts by design filter out noise and make it easier for traders to focus on important trends. It comes with the price, since a lot of potentially useful information gets lost during the graph formation.

Renko charts are effective in identifying support and resistance levels since there is a lot less noise than a candlestick chart. When a strong trend forms, Renko traders may be able to ride that trend for a long time before even one brick in the opposite direction forms.

Trading signals are typically generated when the direction of the trend changes and the bricks alternate colors. For example, a trader might sell the asset when a red box appears after a series of climbing white boxes. Similarly, if the overall trend is up (lots of white/green boxes) a trader may enter a long position when a white brick occurs after one or two red boxes.

Tradingview script

You may use renko on if you have a paid subscription, however it’s hard to create automated strategies on top of it and …you know… it requires paid subscription. However, the definition of renko is well documented, so it can be implemented with a pine script.

The script is available for everyone to use on trading view under the name of RenkoOnCandlesticks. You can find the source code of the current version of the script on my github page here.

How do I use it

No indicator is a grail (at least I didn’t find one yet) but this one helps to understand the current trend. Note, that while renko is not timeframe dependent, this particular implementation is if you use ATR (and I strongly recommend to use ATR since constant block size does not make a lot of sense in my mind).

I use both renko bricks direction and it’s position in relate to average to identify which side I want to trade, then I use other indicators to get better entry points in the right direction

Obligatory part

This script does not guarantee positive returns, however if it did help you earn some money and you feel generous, a small tip would be awesome: