Renko charts are from the noiseless charting category. Renko charts are a diagonal charting system. Because they are from the noiseless family, only meaningful price action gets plotted on the chart. By meaningful we mean the price is plotted on the chart only when the criteria of box values are met. I have explained the concept of Renko plotting system and box size criteria elsewhere in my newsletter, so do check it out. Because Renko are a diagonal plotting system and because they are noiseless charts, visualizing the trend is simple.

Price structures – Basic formations of trend

As per classical theory of technical analysis, price moves in waves. That is, they go up and down. When the price goes up and reverse, the reversal point is called a High and when price go down and reverse, the reversal point is called a Low.

When price experiences a series of Higher Highs and Higher Lows, the trend is said to be in an uptrend. This is also referred to as a bullish market. Similarly, when the price forms a series of Lower Highs and Lower Lows, the market is said to be in a downtrend. This is referred to as bearish market. These price structures can be visualized on Renko charts.

Below is an example of bullish Price structure on Renko chart of IPCALAB

Only Price structures are enough for trading?

So the question is, can trades be taken only based on price structures? The answer is no. As seen in the above chart, just taking a trade based on Price structures can prove to be a mistake. Although the price is forming bullish Price structures, it is also forming a bearish price structure and is immediately followed by a bullish price structure. The chart is still lacking a context.

To add context to the chart, we add a 40-brick Exponential Moving Average (EMA) act as a trend filter. When price is above the EMA, it can be considered to be in an uptrend. Similarly, when the price is below the EMA, it can be considered to be in a downtrend. Adding EMA with price structure adds to the accuracy of the trend analysis.

In my P&F setup newsletter, we discussed the concept of P&F setup. The same logic can be borrowed and applied to Renko charts.

When price is above the EMA and the price structure is also bullish, the Renko setup is bullish.

When price is below the EMA and the price structure is also bearish, the Renko setup is bearish.

If the price structure and EMA are not in sync, the Renko setup is considered to be Neutral.

The chart below is the same chart of IPCALAB with 40-brick EMA plotted on it. Observe how the price structures work with EMA to help us identify trend.

Observe the chart below of MANYAVAR. The price formed bearish price structure below the EMA. This shows a bearish trend and a bearish Renko setup. When there was a bullish price structure, the price moved towards the EMA and reversed.

The method of trend analysis discussed here is applicable on all the Box sizes. I have explained the concept in more detail using other examples in the following YouTube video. Do check it out!!!! 👇🏻👇🏻👇🏻👇🏻