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The curious case of RENKO

One of the simplest charts out there and also one of the most underutilised, the amount of information you can glean at a glance is just simply, unremarkable. People often associate Renko charts with beginners but do not underestimate the power of this simple chart. This simple chart used on its own or in conjunction with your trading strategy can give you that edge.You can confirm directional bias, visualise key support and resistance levels easily, visualise trends with unmatched clarity. Again, I feel, the biggest advantage of Renko is its simplicity and clarity which can reduce the clutter and lead to easier decision making.

Lets analyse Gold or XAUUSD Renko Chart on D1 Timeframe,

• First and foremost, we can deduce price action going back more than 12years! 12 years of trend visualised. We can clearly see that between 2012 and 2013 Gold was range bound in a sideways market. 2013-2016 it was in a downtrend and we can see how the Renko Price action becomes more choppy as we near the bottom. 2016-2018 we see a period of consolidation after hitting rock bottom around 1000$/ounce. 2018-2020 ( mid ) Gold was in a strong uptrend. 2021 brought about some recorrection from 2020 high of 2000$/ounce. We can visualise all of 2024 very easily as a strong uptrend with Gold prices touching a record 2500$/ounce for the first time.

• Since each Renko Box is constructed using Average True Range ( ATR ) it gives us an idea about Golds volatility very clearly as well. This can help us place our Stop Loss better. We can see the wicks form with certain Renko boxes showing us periods of higher volatility. What wicks can also show us is, every time a wick formed and a different colour Renko bar was printed, it was a strong indicator of trend reversal. How you choose to use it is up to you ( individual preferences and style ) but almost always the next Renko candle that prints after a colour change and wick the next one is also formed. This can be a high confluence strategy used in conjunction with candlesticks or on its own, albeit with a wider stop loss, but then again, win rate more than makes up for it.

• We can clearly see Support and resistance zones where the most struggle between bulls and bears was and the most glaring Resistance level that we can see is 2000$/ounce for Gold. A multiyear resistance level for Gold in 2020, 2022 and 2023. What’s to say if we see a fall back to this level in the next few years ( highly unlikely based on economic factors and rising inflation ) it would be the place to buy!

The possibilities with utilising Renko Charts are endless. You could,

• Analyse Reno on a smaller timeframe such as M15 and takes trades in direction of larger D1 trend.

• If your strategy allows for averaging out, being in line with the larger trend becomes clear as day.

• In my experience, I find Renko to be superior to simple or exponential moving averages