Renko charts are a type of technical analysis chart that is commonly used in the forex market. These charts are unique in that they do not display time like traditional candlestick or bar charts. Instead, they use price movement to create blocks or bricks that form a chart.
The basic idea behind renko charts is to remove the noise and focus on price movements that are significant. This is achieved by only displaying price changes that meet a predetermined threshold. The threshold can be set as a fixed price amount or a percentage of the current price.
For example, if the threshold is set at $1, then a price change of $1 or more is required for a new block to be added to the chart. If the threshold is set at 1%, then a price change of 1% or more is required.
Renko charts are popular among forex traders because they can help identify trends and support and resistance levels more easily than other types of charts. This is because they filter out the small price movements that are often random and not significant.
One of the key benefits of renko charts is that they can help traders avoid false signals that can occur with other types of charts. False signals can occur when small price movements trigger a change in the chart, leading traders to make trades based on insignificant price movements.
Renko charts also make it easier to identify trends, as each block represents a set price movement. If the blocks are predominantly moving in one direction, it is likely that the market is trending in that direction. This information can be used to make trading decisions.
Another advantage of renko charts is that they can help traders identify support and resistance levels more easily. Support and resistance levels are areas where the price has historically found it difficult to move beyond. These levels can be used as entry and exit points for trades.
Renko charts can also be used in combination with other technical indicators to confirm signals or identify potential changes in the market. For example, traders may use moving averages or oscillators in conjunction with renko charts to help identify potential trading opportunities.
In conclusion, renko charts are a popular type of technical analysis chart used in the forex market. They use price movement to create blocks or bricks that form a chart, and can help traders identify trends and support and resistance levels more easily than other types of charts. Renko charts are particularly useful for filtering out noise and avoiding false signals, and can be used in combination with other technical indicators to confirm signals or identify potential changes in the market.
