Renko Charts: a Tool for Trading in Low-Liquidity Markets

Why Renko Charts Work Well for Low-Liquidity Markets

On a standard candlestick chart, each candle corresponds to a specific time interval. Renko uses a different principle — a new element appears only after the price changes by a pre-set amount. This determines the size of the block, or “brick,” which serves as the basic unit of such a chart. If the move is smaller than the specified value, no new block is formed.

All bricks are the same size and show the direction of price movement. Up bricks form when the price rises, and down bricks form when it falls. A sequence of bricks in the same direction helps visually highlight a sustained move, while a change in direction may indicate a correction or a potential reversal.

The name Renko comes from the Japanese word renga, which translates as “brick.” It reflects the very principle of building the chart from a sequence of identical price blocks.

One of Renko’s key features is that each brick is not tied to a fixed time interval. It appears only after the price moves by a specified amount. At the same time, on TradingView, Renko’s historical construction depends on the timeframe of the source data — the platform uses closing prices or the OHLC of the corresponding periods. The shorter the selected interval, the more price data is taken into account when building the chart.

In low-liquidity markets, individual trades can noticeably affect quotes, and the spread between bid and ask prices often widens. Renko filters out some minor moves and makes the overall structure of price changes more visible.

However, this approach has limitations. TradingView warns that Renko levels are calculated synthetically and may not match actual market prices at a specific moment. That is why these charts are primarily suited for visual analysis. Backtesting trading strategies directly on historical Renko values can produce results that would be impossible to achieve with real trade execution.

How to Set Up Renko for a Low-Liquidity Market

One of Renko’s main parameters is the block size, meaning the minimum price change after which a new brick appears on the chart. It directly affects the chart’s sensitivity:

• too small a value will increase the number of blocks and bring back some of the price noise
• too large a value will smooth the move more aggressively and reflect a change in direction later.

There is no universal brick size for low-liquidity assets — the right value depends on volatility, the minimum tick size, and the specifics of trading in a given instrument. In Percentage LTP mode on TradingView, the default value is 1%, but this is just the platform’s standard setting, not a universal benchmark.

The box size can be set manually or calculated using the Average True Range (ATR). When you choose ATR, TradingView uses the volatility metric from a regular candlestick chart to determine the brick size. This way, the Renko scale changes based on the nature of the price action of a specific asset.

When configuring it, you should also consider the typical bid–ask spread. In low-liquidity markets, it can be wide — in that case, a brick that’s too small may reflect routine fluctuations within the spread rather than a more meaningful price move. There is no universal ratio between box size and spread.

Let’s look at how to set up Renko on TradingView. First, in the chart type selection menu, choose Renko. Then open the chart settings and go to the construction parameters.

The main parameter is called Box size assignment method. TradingView offers three calculation methods:

• ATR — the box size is calculated automatically based on volatility
• Traditional — the user sets a fixed box size manually
• Percentage LTP — the box size is calculated as a set percentage of the last traded price, rounded to the minimum tick size.

For example, at 0.5%, the platform determines the brick size based on the last traded price, rounds it to the minimum tick size, and applies it to the chart. TradingView also warns separately that in Percentage LTP mode, historical values may be recalculated when new data comes in.

After you apply the settings, Renko will filter out moves that are smaller than the selected brick size. As a result, the chart will show fewer local fluctuations than traditional candles, and directional move sequences will stand out more clearly.

How to Use Renko in a Trading Strategy

Renko can be used in trend-following strategies, where the main focus is on the direction of price movement, and small fluctuations are of secondary importance.

One possible approach involves using a sequence of bricks in the same direction to assess the current move. For example, several consecutive bullish bricks may be a condition for looking for an entry point into a long position, while a sequence of bearish bricks may point to a short. However, the number of bricks alone is not a standalone trading signal and requires additional criteria.

A change in brick direction can also be used as one of the conditions for exiting a position — it shows that the price has moved the set distance in the opposite direction.

In low-liquidity markets, it is especially important to complement such conditions with other tools, as sharp local moves can lead to false entries. One option is the Relative Strength Index (RSI):

• an RSI move out of the oversold zone alongside a sequence of rising blocks can be treated as an additional sign of momentum recovery;
• an RSI drop from the overbought zone at the same time as bearish blocks appear may point to weakening upside momentum.

Renko can also be combined with moving averages. For example, an EMA 20 and EMA 50 crossover, together with the appearance of a new block in the same direction, can be used as an additional condition in a trading system.

Before opening a position, you should define your acceptable risk and exit conditions in advance. Depending on the strategy, a stop-loss can be tied to support and resistance levels or other pre-set price values. At the same time, Renko brick levels should not be automatically treated as actual execution prices — on TradingView, they are calculated synthetically.

In a low-liquidity market, the price can quickly move through several levels due to a small number of orders in the order book. Renko will display this move with multiple bricks, but it will not show market depth or eliminate slippage. Therefore, when assessing a potential trade, you should separately factor in liquidity, the spread, and the possible gap between the expected and actual execution price.

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Example of Using Renko in a Trade

Let’s look at a retrospective educational example using the ZKL token. Over a long period, the asset was in a downtrend, but in early July 2025, the first bullish brick appeared on the Renko chart. This scenario is provided solely to illustrate how to read the chart and is not a strategy test with confirmed execution prices.

After two more blocks appeared in the same direction, it would have been possible to consider opening a long position around $0.0285. To limit risk, in this hypothetical example, a stop-loss could have been placed below the entry point.

As quotes rose, the protective order could be moved higher, and the appearance of several descending blocks could be used as one of the exit conditions. In this hypothetical scenario, the difference between the $0.0285 and $0.0335 levels is about 17.5%. Actual results could differ due to the spread, slippage, and the synthetic nature of Renko levels.

Working with Renko, like with other technical analysis tools, requires a consistent approach. To evaluate a strategy’s effectiveness, it is useful to keep a trading journal and record:

• entry and exit price
• the number of blocks before opening a position
• price action after closing the trade to assess whether the exit was timely
• the risk-to-reward ratio
• additional observations and comments

It is also worth analyzing the statistics of past trades — the share of profitable transactions, the average profit and loss size, as well as results under different brick size settings. This helps assess which parameters best fit a specific market and trading system.

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Conclusions

Renko charts filter out some minor price fluctuations and help you focus on the direction and magnitude of the move. A new brick appears only after the price changes by a set amount, so the time factor plays a secondary role in this type of display.

In low-liquidity markets, Renko can simplify the visual analysis of sharp and uneven moves. At the same time, the chart does not show market depth, does not eliminate the impact of a wide spread, and does not allow you to assess actual slippage. Synthetic levels also limit the ability to use Renko for accurate backtesting of trade execution on historical data.

With an appropriate brick size, Renko can be used as an additional tool alongside RSI, EMA, ATR, and other technical analysis methods. However, decisions to open and close a position should take into account not only the structure of such a chart, but also real market characteristics.