Renko

Every chart we have looked at so far has one thing in common: the x-axis is Time. Whether it is a line chart or a candlestick chart, a new bar is drawn every minute, every day, or every week, regardless of whether the price actually did anything interesting.

If a stock trades sideways in a boring ₹2 range for six months, a standard daily chart will dutifully draw 120 boring candlesticks. It clutters the screen and tires your eyes.

What if we only drew a new bar when the price actually moved?

The Japanese invented the Renko chart to eliminate time entirely. The word Renko comes from renga, the Japanese word for brick.

A Renko chart only plots a brick when the price has moved a specific, fixed amount. Time is completely irrelevant. If it takes three weeks for the price to move ₹10, no bricks are drawn for three weeks, and then one brick is plotted. If the price moves ₹30 in two hours, three bricks are plotted instantly.

You must define the "Brick Size". Let's say you set the brick size to ₹10.

• A new green (hollow) brick is drawn only when the price closes ₹10 higher than the top of the previous brick.
• A new red (solid) brick is drawn only when the price closes ₹10 lower than the bottom of the previous brick.

Notice the asymmetry: to reverse a trend (to print a red brick after a green brick), the price has to move two brick sizes down. It has to cover the length of the current green brick, plus the length of a new red brick below it. This makes Renko charts incredibly stubborn about changing direction.

Every price in this module is an illustrative example, not a real quote. [illustrative]

Click through the steps below to watch a chaotic market being filtered into simple bricks. The faint grey line in the background is the actual, time-based price action.

Renko charts are brilliant for spotting massive, undeniable trends because they refuse to acknowledge sideways chop.

1. A structural bull market: A chart showing an unbroken diagonal staircase of 30 green bricks. You know instantly that the stock has risen cleanly without ever suffering a pullback larger than two brick sizes.
2. A cyclical holding pattern: A stock that spends a year stuck in a ₹50 range. On a candlestick chart, it is an illegible mess of 250 bars. On a ₹10 Renko chart, it is just five bricks bouncing back and forth.

Renko charts delete time. This means you cannot use them to calculate momentum or velocity.

If you see five green bricks, you know the price went up ₹50. But you have absolutely no idea if that took five minutes or five years. Because time is missing, traditional indicators like moving averages or RSI behave very strangely on a Renko chart.

The danger of a Renko chart is in the "Brick Size" setting.

If you set the brick size too large (e.g., ₹50 on a ₹200 stock), a massive crash could be happening in real life, but your Renko chart will show absolutely nothing because the price hasn't crossed the ₹50 threshold yet. You might hold onto a plummeting stock, waiting for a red brick to print, completely unaware that your portfolio is burning.

There is no "correct" brick size — only a trade-off, and the same chart can look calm or frantic depending on the one number you pick.

Before you trust a smooth Renko trend, ask: what would change your mind? If shrinking the brick size makes the same history sprout reversals, the smoothness was your setting, not the stock.

Renko charts prove that the x-axis does not have to be time. But Renko relies on a fixed, arbitrary box size (like ₹10). If the stock price doubles, a ₹10 box becomes too small.

The oldest charting method in Western finance solved this problem over a century ago, using Xs and Os to track pure supply and demand.

That brings us to Point & Figure.