49. Renko and Point & Figure Charts

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1. What are Renko and Point & Figure Charts?

Chart Type	Description
Renko Charts	Time-independent charts that use fixed-size bricks to show price movement and filter out noise.
Point & Figure	Also time-independent; uses X’s and O’s in columns to show price direction (up/down) with box sizes and reversal thresholds.

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2. Components

Chart Type	Components
Renko	Bricks, Brick Size (fixed or ATR-based), Direction (up/down)
P&F	Columns of Xs (rising) and Os (falling), Box Size, Reversal Count (e.g., 3-box reversal)

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3. Pros and Cons

Chart Type	Pros	Cons
Renko	Removes noise, great for spotting trends	Lags in fast markets, not suitable for tight scalping
P&F	Clear entry/exit points, helps visualize supply/demand zones	Complex to set up, not intuitive for beginners

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4. Purpose in Stock Analysis

Chart Type	Purpose
Renko	To identify smooth trends and filter out market noise.
P&F	To highlight support/resistance and trend reversals based on price action alone.

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5. How Are They Calculated/Derived?

Chart Type	Calculation Summary
Renko	A new brick forms only when price moves by at least brick size from the previous brick's close.
P&F	X or O added for each box size moved in one direction; a new column starts after a reversal threshold is hit.

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6. When Should Traders Use Them?

Chart Type	Use Cases
Renko	For trend-following systems, swing trading, smoothing signals
P&F	For breakout traders, pattern recognition (triple top/bottom, catapults, etc.)

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7. Limitations and Risks

Chart Type	Limitations
Renko	May miss rapid reversals; depends heavily on brick size
P&F	Doesn’t show volume or time; requires careful setting of box size and reversal amount

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8. Common Mistakes

Chart Type	Mistakes
Renko	Using inappropriate brick size; misreading reversals without confirmation
P&F	Misinterpreting columns or patterns without understanding rules (e.g., 3-box reversal logic)

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9. Best Combinations with Other Tools

Chart Type	Can Be Combined With
Renko	Moving averages, RSI, MACD, Bollinger Bands
P&F	Price objectives, classical chart patterns, trendlines, support/resistance

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10. Pro vs. Beginner Interpretation

Chart Type	Professionals	Beginners
Renko	Use to ride trends, adjust brick size based on volatility, use as a trend filter	May overreact to each brick, use default settings without calibration
P&F	Use for pattern-based trading, support/resistance analysis, conservative breakout entries	Confused by notation, treat P&F as candlestick equivalent

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