Types of charts in trading: line, candlestick and Renko

Why the chart type matters

A chart is a summary of price data. Every chart type keeps some information and drops the rest. The same market can look calm on one chart and chaotic on another. Neither view is wrong, but each one leaves things out.

Before you read candlestick patterns or draw support and resistance, know what your chart is not showing you.

Most of these chart types are built from four prices for each period:

• Open: the first price of the period.
• High: the highest price traded or quoted.
• Low: the lowest price.
• Close: the last price of the period.

Together they are called OHLC.

The same price move, drawn three ways

The sketch below shows one invented trading session. No real prices are used. Price rises, drops sharply in the middle of the session, then recovers and closes higher.

[ ] is a period or brick that closed higher. [#] closed lower. | is a wick.

The line chart barely registers the drop. The candlestick chart shows it as a long lower wick. The Renko chart shows no drop at all, because the price did not move far enough in the opposite direction to print a down brick. A trader with a stop loss inside that wick would have been stopped out on all three charts. Only the candlestick chart shows why.

Line chart

How it is built: a line joins the close of each period. The open, high and low are ignored.

What it shows: the general direction of the market with very little noise. It is useful for a quick look at the bigger picture and for comparing markets.

What it hides:

• Wicks and intra-period extremes. Stops and entries are triggered by highs and lows, not closes.
• Gaps between the close of one period and the open of the next.
• The difference between a period that closed quietly and one that swung wildly before it closed.

Failure mode: levels drawn on a line chart often sit in the wrong place compared with where price actually traded. A "clean" level can hide repeated spikes through it.

Bar chart (OHLC bars)

How it is built: each period is a vertical line from low to high. A small tick on the left marks the open and a tick on the right marks the close.

What it shows: the same OHLC data as a candlestick chart, in a more compact form.

What it hides: nothing, in data terms. The direction of each bar is harder to read at a glance, so many traders find it slower to scan.

Candlestick chart

How it is built: each period becomes a candle. The body runs from open to close. The wicks (also called shadows) run from the body to the high and the low. A candle that closed above its open is usually drawn hollow or green. One that closed below is usually drawn filled or red.

What it shows: the full OHLC range for every period. It shows rejection (long wicks), strong one-way periods (large bodies with small wicks) and indecision (small bodies). This is why most price action work uses candlesticks.

What it hides:

• The order of events inside the candle. A long-wicked candle does not tell you whether the high or the low came first.
• Anything below its timeframe. One hourly candle can contain a fast spike and a reversal that only a lower timeframe shows. See multiple timeframe analysis.

Failure modes experienced traders run into:

• Server time. Daily and weekly candles depend on the platform's server clock. Different providers can show different daily candles for the same market, and some show a small extra candle at the start of the week. A daily pattern on one platform may not exist on another.
• Bid prices. MetaTrader charts are normally drawn from the bid price. Buy orders fill at the ask, which is higher by the spread. A buy stop placed at a candle high can trigger even though the chart never seems to reach it. The same applies to sell positions closed at the ask. When spreads widen, this effect grows.
• Unfinished candles. The last candle keeps changing until its period closes. A pattern that looks complete halfway through can disappear by the close.

Heikin Ashi candles look similar but use averaged values. Their open and close are not real traded prices, so they are a separate chart type with their own limits.

Renko chart

How it is built: Renko ignores time. It draws a new brick only when price moves a set distance, called the brick size. Up bricks stack upward while price keeps rising by full brick sizes. A down brick appears only after price reverses far enough past the previous brick. Most builders require a move beyond the opposite end of the last brick. The brick size can be fixed in pips or points, or based on volatility such as the ATR.

What it shows: direction with very little noise. Trends appear as clean staircases, and sideways markets produce few bricks.

What it hides:

• Time. Ten bricks might form in minutes during a news release, or over days in a quiet market. The chart looks the same.
• Wicks and extremes. Moves smaller than the reversal distance vanish, as in the sketch above. Your real stop loss does not vanish with them.
• Gaps. A price jump is drawn as a neat row of bricks, as if price traded at each level. It did not, and orders inside a gap fill at the next available price.

Failure modes:

• The last brick can change. Some Renko tools redraw the most recent bricks as new data arrives. This is a form of repainting.
• Misleading backtests. On historical Renko data, entries appear to fill exactly at brick edges. Live trading fills at the market price with spread and slippage, so backtest results on Renko are often far better than anything achievable in practice.
• Brick size choice. A small brick brings back the noise. A large brick reacts late. No setting is correct in general, and the same setting can behave very differently on a currency pair and on gold.
• Built from closes or ticks. Bricks built from candle closes differ from bricks built from ticks. Two Renko charts of the same market can disagree.

Standard MetaTrader 4 and MetaTrader 5 offer line, bar and candlestick charts. Renko usually needs a custom indicator or a custom symbol. Check how any such tool builds its bricks before you rely on it.

Quick comparison

Line chart vs candlestick: which to use when

A line chart is useful for an uncluttered view of direction over a long period. A candlestick chart is needed whenever you place orders, set stops or judge how price reacted at a level. Many traders check direction on a line or Renko view and confirm levels on candlesticks. Whatever you use, set your stops against the real highs and lows.

No chart type predicts price. Leveraged forex and CFD trading can lose money fast, and a cleaner-looking chart does not reduce that risk. For position sizing and stop placement, read risk management. For the wider topic, see technical analysis.

Frequently asked questions

What are the main types of charts in trading?

Line, bar and candlestick charts are time-based. Renko is price-based and ignores time. Heikin Ashi is a modified candlestick chart built from averaged values.

Is a Renko chart more accurate than a candlestick chart?

No. Renko removes information, including time and wicks. It looks cleaner because it shows less, not because it is more accurate.

Why does my stop get hit when the chart never touched it?

Usually the chart is drawn from bid prices while your order is triggered at the ask, or the move happened inside a wick that your chart type hides.

Can I backtest a strategy on Renko charts?

You can, but results are often unrealistic because historical bricks imply perfect fills at brick edges. Test with realistic spreads and slippage, or forward-test on a demo.

Do candlestick patterns work the same on every platform?

Not always. Daily and weekly candles depend on server time, so the same pattern may look different, or not exist, on another platform.