Renko candlesticks are a type of chart in technical analysis that focuses on price action only, ignoring the time factor. Renko candlesticks are based on a certain range of movement (known as the size or “brick size”) that is determined in advance. A new candle (or brick) is created only if the price moves a certain amount up or down, regardless of the time it took.
The difference between Renko candles and Japanese candles:
Advantages of Renko candles:
1. Minimize false signals: Focus only on the real price movement.
2. Trend clarity: Trends are more clearly shown than Japanese candlesticks.
3. Ease of identifying levels: It helps in identifying support and resistance accurately.
Disadvantages of Renko candles:
1. Signal delay: The signal may appear after the movement actually occurs.
2. Ignore small fluctuations: It does not show all the details of the market.
When to use Renko candles?
When you want to focus on the general market trend and avoid the noise.
In long term trading strategies.
In trending markets or when looking for more precise entry and exit points.
When to use Japanese candlesticks?
For daily or short term market analysis.
To understand market sentiment (bullish or bearish) over specific time periods.
When analyzing reversal and trend continuation patterns.
In short, Renko candlesticks provide a simplified picture of price action and favor long trends, while Japanese candlesticks give precise details of the market over a specific period.