The renko chart is a very profound and convenient tool intended for determining a development in the financial market, but really not very many forex traders know the merit and therefore they do not benefit from it. The word "Renko" comes from "Renga", the Japanese word for "Brick". The square boxes that make up a Renko chart are often referred to as "bricks.

Renko charts are "time independent" charts that do not possess constantly spaced time axes as seen in Candle stick and Bar charts. Renko charts are based on closing prices or on highs and lows of the period. We prefer to build our own charts on the highs and lows of the period. Renko charts possess 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 greater than the top (or lower the bottom) of the last brick on the chart, a new brick is added in the next chart column. Blue bricks are added if prices are rising. Red bricks are added if prices are falling. Only one type of brick can be added for each time period. Bricks are always with their corners touching and no more than one brick may occupy each chart column.

Suppose price falls lower beneath the base of the preceding brick by at least the box size, one or more red bricks are drawn in new columns and if price rises higher than the top of the preceding brick by at least the box size, one or more blue bricks are drawn in new columns. The height of the bricks is all the time equal to the box size. If prices move more than the brick size, but not sufficient to create two bricks, just one brick is drawn.

The renko chart is best used as a trend-follow-ing system; there are times when renko charts generate whipsaws, giving signals close to the end of short-lived trends. Unfortunately no one can control that and that happens to be the nature of the market. When renko is compared to other types of chart it can be seen that it is easier to read and therefore interpret what the market is doing.