In this article, we will explain the Brick Size in Renko Chart, commonly used for technical analysis among the price action trader. The charting principle of the Renko Chart is quite different from the rest. For example, Renko chart is constructed by drawing bricks of fixed height in the price series. If the price moved up by 5 points from the top of brick, then we will draw one white up brick. Likewise, if the price moved down by 5 points from the bottom of the brick, then we will draw one black down brick. The brick will be drawn either on the top or on the bottom of the other brick always. There are some drawbacks in Renko chart too. Because Renko chart lose all time information from our candlestick chart, you are no longer able to compare your normal candlestick chart to your Renko chart. In addition, unlike the candlestick chart, you have to select the sensible height of brick. Since there are many benefits using Renko chart, some traders are never worried about these disadvantages. Overall, Renko chart provide quite a lot of features which other chart does not provide.
Renko bricks are much more concise than candlestick chart. For example, 100 candlesticks can be transformed into only 52 Renko bricks or less in some cases. However, during this transformation, we are losing time information of our candlestick chart. Another important point you can observe here is that the Renko chart provide much smoother and readable visualization representation of trend. This is because the equal height of Renko brick reduces a lot of noise present in candlestick chart. With Renko Brick chart, it is much easier to identify trend and reversal patterns.
In Renko Chart, Renko brick size is the most important control variable in your trading. You have a choice of brick size. However, it is typically recommended to use multiple of 10 or 5 as the choice. For example, you can use following brick size depending on the size of price range in your chart.
If you have a math background and if you do understand standard deviation, it is good to guess these numbers around 1 standard deviation. This is just some idea for your trading.
For some futures, commodities, Stock price, you need to have 1 or 2 more zeros in your brick size in comparison to Forex market. Just do some experiment to find the suitable and sensible brick size for your trading.
This Renko tools are available in both Smart Renko and Price Breakout Pattern Scanner. Hence this article applies to Smart Renko and Price Breakout Pattern Scanner.
For MetaTrader 4 users, to calculate bricks, you have to download historical data before using our Smart Renko chart.