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You are here: Home / Nifty Technicals / Renko Charts for Nifty : Best Trend Indicator

Renko Charts for Nifty : Best Trend Indicator

August 26, 2009 by Rajandran 20 Comments


 

Extracted from StockCharts.com
 
Renko charts are price charts with rising and falling diagonal lines of boxes that are either filled or hollow. Renko charts are "time independent" charts that do not have constantly spaced time axes. Here is an example of a Renko chart:
 
Japanese word for "brick". The filled and hollow squares that make up a Renko chart are often referred to as "bricks." Renko charts were popularized by Steve Nison

Renko charts have 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. Hollow bricks are added if prices are rising. Black 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.

It's important to note that prices may exceed the top (or bottom) of the current brick. Again, new bricks are only added when prices completely "fill" the brick. For example, for a 5-point chart, if prices rise from 98 to 102, the hollow brick that goes from 95 to 100 is added to the chart BUT the hollow brick that goes from 100 to 105 is NOT DRAWN. The Renko chart will give the impression that prices stopped at 100.

It's also important to remember that Renko charts may not change for several time periods. Prices have to rise or fall "significantly" in order for bricks to be added.

Interpretation

Hollow bricks are bullish, black bricks are bearish – that's the simplest interpretation of Renko charts. Renko charts may be most useful in identifying trends and trend direction. Because they screen out moves that are less than the Brick size, trends are much easier to spot and follow. In order to avoid whiplash periods, some people wait unto 2 or 3 bricks appear in a new direction before taking a position.

Parameters

There are two ways to specify the Brick Size for a Renko chart: Absolute Points and Average True Range (ATR). In addition, you can specify whether closing prices or high/low prices are used.

Absolute Points

With the "Absolute Points" method, you specify the size of each brick on the chart in points. The advantage of this method is that it is very easy to understand and predict when new bricks will appear. The disadvantage is that the point value needs to be different for high priced stocks than for low priced stocks. Typically you will need to choose a value that is roughly 1/20th the average price of the stock during the time frame you want to chart. Common values include 1, 2, 4, and 10.

Important Note: The Default for the "Pts" method is currently 14 which is too large for most stocks. You'll need to change it to a smaller number to get a useful chart.

Average True Range

The "Average True Range (ATR)" method uses the value of the ATR indicator to determine the brick size. The ATR indicator is designed to ignore the normal volatility of a stock and thus it can "automatically" find good brick sizes regardless of the value or volatility of the stock selected. ATR with a value of 14 is the default value for Renko charts and should generate a very usable chart in most cases.

Close Only

High/Low Prices

When using High/Low prices, it's important to note that the rules for drawing Renko charts favor hollow bricks. In other words, regardless of the current direction of the bricks, you first check to see if any new hollow bricks can be added to a chart and, if they can, you then stop without looking at the lows of the day.

Source:
www.marketcalls.in

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Filed Under: Nifty Technicals

About Rajandran

Rajandran is a Full time trader and founder of Marketcalls & Co-Founder of Traderscafe, trades mostly using discretionary Trading Concepts like Market Profile, Trading sentimental analysis, building timing models, algorithmic trading models. Instructs professional traders, full time traders & aspiring full time traders. Rajandran attended college in the Chennai where he earned a BE in Electronics and Communications. Rajandran has a broad understanding of trading softwares like Amibroker, Ninjatrader, Esignal, Metastock, Motivewave, Market Analyst(Optuma),Metatrader,Tradingivew,Python and understands individual needs of traders and investors utilizing a wide range of methodologies.

Comments

  1. r m says

    August 26, 2009 at 2:11 pm

    Dear Rajandran,Is not it just like p & f chart?Regards.

    Reply
  2. Anonymous says

    August 26, 2009 at 7:34 pm

    Hi,doing great work……..can u plz post Ashok leyland gannfann chart……..if possible….!!!!!thanks in advance

    Reply
  3. Anonymous says

    August 26, 2009 at 7:34 pm

    Hi,doing great work……..can u plz post Ashok leyland gannfann chart……..if possible….!!!!!thanks in advanceabhi

    Reply
  4. Rajandran says

    August 27, 2009 at 4:57 am

    @RMP&F Charts are different from RENKO..though both are used to predict the nature oftrend.

    Reply
  5. cambatta says

    July 25, 2010 at 2:44 pm

    Sir,

    Can you post the RENKO AFL?

    sam

    Reply
    • MAHESH V says

      January 31, 2018 at 10:20 am

      _SECTION_BEGIN(“Renko Chart”);
      // Renko Chart

      SetBarsRequired(10000,10000);

      // Brick size is dependant on what you want, if too small will not produce a chart due to insufficient x-axis bars
      //Brick = LastValue( ATR(100) );
      //Brick = LastValue( Max(0.02*C, 0.05) );
      Brick = Param( “Brick Size”, 10, 0.01, 50.00, 0.01 );
      reverse = 2;

      // Convert the closing price to rising and falling rounded bricks
      CF = ceil(C/Brick);
      CR = floor(C/Brick);

      // initialize first element
      j = 0;
      RKC[j] = CF[0];
      RKO[j] = CF[0] + 1;

      down[j] = 1; // By default the first bar is a down bar.
      up[j] = 0;

      // Loop to produce the Renko values in number of bricks

      for( i=1; i<BarCount-1; i++ )
      {
      if( CF[i] <= RKC[j] -- 1 && down[j] ) // Continue down
      {
      num = RKC[j] -- CF[i];
      for( x=1; x= RKC[j] + Reverse && down[j] ) // Change down to up
      {
      num = CR[i] -- RKC[j];
      j++;
      up[j] = 1;
      down[j] = 0;
      RKC[j] = RKC[j-1] + 2;
      RKO[j] = RKC[j] -- 1;
      for( x=2; x= RKC[j] + 1 && up[j] ) // Continue Up
      {
      num = CR[i] -- RKC[j];
      for( x=1; x<=num; x++ )
      {
      j++;
      Up[j] = 1;
      Down[j] = 0;
      RKC[j] = RKC[j-1] + 1;
      RKO[j] = RKC[j] -- 1;
      }
      }
      else
      {
      if( CF[i] <= RKC[j] -- Reverse && up[j] ) // Change up to down
      {
      num = RKC[j] -- CF[i];
      j++;
      Up[j] = 0;
      Down[j] = 1;
      RKC[j] = RKC[j-1] -- 2;
      RKO[j] = RKC[j] + 1;
      for( x=2; x<=num; x++ )
      {
      j++;
      up[j] = 0;
      down[j] = 1;
      RKC[j] = RKC[j-1] -- 1;
      RKO[j] = RKC[j] + 1;
      }
      }
      }
      }
      }
      }

      // move the chart to right end of chart space, ie last brick on last bar position
      delta = BarCount-1 -- j;

      RKC = Ref( RKC, -delta );
      RKO = Ref( RKO, -delta );

      Up = Ref( Up, -delta );
      Down = Ref( Down, -delta );

      /*
      rC = RKC * Brick;// + (Up-down)*Brick/2;
      rO = RC -- (Up-down)*Brick;
      rH = Max(rC,rO);
      rL = Min(rC,rO);
      */

      C = RKC * Brick;// + (Up-down)*Brick/2;
      O = C -- (Up-down)*Brick;
      H = Max(C,O);
      L = Min(C,O);

      Plot( C, "", colorGrey50,styleCandle);
      // plot chart
      //plotOHLC( rO, rH, rL, rC, "Renko Price " , colorBlack, styleCandle);
      GraphXSpace=5;

      Title = Name() + " -- {{INTERVAL}} {{DATE}} -- Renko Chart : Last Value = " + RKC * Brick + ", Brick Size = " + Brick;

      _SECTION_END();

      Reply
  6. rajendra says

    January 21, 2011 at 3:07 pm

    can i get renko chart of nifty &indian stock

    Reply
  7. Milind says

    March 10, 2011 at 10:52 pm

    how 2 download tgis formula?

    Reply
  8. ramechu says

    August 7, 2013 at 12:32 pm

    Hi,
    If i choose ATR, closing price for Renko charts on Nifty, and if the volatility changes and true range changes, will the chart dynamically adjust the brick size??

    Reply
  9. Sadashiv Kulkarni says

    February 24, 2014 at 6:07 pm

    Halo sir ,
    Where can I get renko charts for nifty options?

    Reply
  10. mayank says

    March 29, 2014 at 11:53 am

    can you please suggest a link for afl where we can fix brick size as per atr as whatever im getting from net is all fixed increment size and i want atr variable renko afl

    regards

    Reply
    • Aman says

      August 20, 2015 at 7:13 pm

      Please use the below link to see shares with different points instead of fixed ATR…

      http://stockcharts.com/h-sc/ui

      I hope it will help

      Reply
  11. sangeeth says

    July 15, 2015 at 6:37 am

    Hi Sir,

    Can you please share the renko afl with me?

    Regards,
    Sangeetha

    Reply
  12. Aman says

    August 20, 2015 at 7:11 pm

    Hi, if possible, can you please share the platform (free) where I can use Renko chart 60 mins on close basis… As I have used the same on EURUSD… and it works great… But not able to identify the same for Banknifty or shares registered on NSE…

    Reply
  13. Bharat says

    October 30, 2015 at 9:57 am

    Hi can u please email me the amibroker afl for renko charts.It would be really nice of you.
    Thanks

    Reply
  14. Birju says

    February 4, 2017 at 1:32 pm

    Hello Rajendran,

    EOD charts are not working since many days. Can you please check?

    The site is awesome and trading community would be indebted for this contribution.

    Regards,
    Birju

    Reply
  15. sane v. k. says

    March 31, 2017 at 6:57 pm

    sir can you please share renko chart afl for me ( I am using amibroker 5.4 )

    Reply
  16. yogesh kshirsagar says

    June 23, 2017 at 3:43 pm

    where is formula

    Reply
  17. COOLBUDDY says

    August 19, 2017 at 1:47 am

    DO NOT TRUST RENKO BRICKS IN ANY TYPE OF MARKET VOLATILE OR NORMAL DOESN’T MATTER. BCOZ ITS MAJOR ISSUE IS BACK PAINTING / BRICKS REVERSING / BRICKS DISAPPEAR / REFORMING.. NOBODY SPEAKS DEMERIT OF IT, EVERYBODY SHOWS ONE ASPECT.. WHO WILL TELL NEGATIVE SIDE OF RENKO TO THOSE FELLOW BEGINNERS…

    Reply
  18. Ravi says

    September 10, 2017 at 11:25 pm

    Very good post. Thx. Ravi

    Reply

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