When the security closes higher than the top of the previous brick, a white brick is created on top of the previous brick. Conversely, if the security closes lower than the bottom of the previous brick, a black brick is created below the previous brick.
The advantage of Renko charts is that they provide a great visual of price movements, while eliminating market noise and minor price fluctuations. It also makes it easier to identify support and resistance levels.
Once a trend is identified, traders can then employ a trading strategy that takes into account the trend direction. Traders who use Renko charts often combine them with other chart types, such as candlesticks, point and figure charts and moving averages, to gain a more comprehensive view of the markets.
In conclusion, Renko charts are a great way for traders to identify trends, enter and exit positions, and set stop-loss and take-profit levels. While their field of view is limited and not suitable for all markets, they do help to filter out noise and, as such, can provide valuable information for traders.