A trader points to monitor displaying an S&P 500 Index chart on the floor of the New York Stock Exchange in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Algo Convention 2019: How To Trade Using Renko Charts

Renko charts only measure price movement. Unlike a standard line or a candlestick chart, Renko charts consist of individual blocks that are called “bricks”.

The first step in construction of a Renko chart is to ascertain the size or range of the brick. For instance, if a stock is trading at Rs 100 apiece and the brick size is set to 5, a new brick will only be formed when the price moves above Rs 105 or below Rs 100.

When determining the value of a brick size, traders, however, should look at its logarithmic value, according to Prashant Shah, founder member and chief executive officer at Definedge Solutions. “As a result, screening of stocks and back-testing the strategy becomes more efficient,” he said on the sidelines of Algo Convention 2019. “Further, a trader should assign a lower brick value if he has a short-term perspective and vice-versa.”

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