Renko vs Heikin Ashi: two ways to smooth a chart
Renko and Heikin Ashi both make a messy chart look calm. They do it in very different ways, and each one hides something different. Here's what you see, and what you don't.
The short answer
A Renko chart draws a brick only when price moves a set amount, the box size. Time doesn't matter. If price doesn't move enough, no new brick appears. See Renko chart.
A Heikin Ashi chart still draws one candle per time period. But each candle uses averaged prices, not the real open and close. That makes trends look smoother. See Heikin Ashi.
Both are filters. Both can make a trend easier to see. Neither shows you the real price the way a normal candlestick chart does.
Side by side
| Renko | Heikin Ashi | |
|---|---|---|
| New bar when | Price moves one box size | Each time period, like normal candles |
| Uses time? | No | Yes |
| Prices shown | Brick edges, rounded to the box size | Averaged, not the real open and close |
| Wicks | Usually none | Yes |
| Hides | Small moves, time, the real path | Real opens and closes, gaps |
| Setting to choose | Box size (fixed or ATR-based) | None |
| Reacts to a turn | After price moves a box (or two) against | After the averages shift, often a few candles |
| Backtest trap | Bricks can form later than they appear | Averaged prices aren't prices you could trade |
How Renko works
A math example. Box size is 10 points. Price starts at 100.
- Price rises to 110: one up brick (100–110).
- Price rises to 125: one more brick (110–120). The 5 extra points don't count yet.
- Price drops to 105: no new brick yet. Most Renko settings need a two-box move against the trend, down to 100, before a down brick appears.
Small wiggles vanish. So does time: a quiet afternoon and a busy minute can each make a single brick. More in renko vs candlestick.
How Heikin Ashi works
Each Heikin Ashi candle is built from averages:
- Its close is the average of the period's open, high, low and close.
- Its open is the midpoint of the previous Heikin Ashi candle's open and close.
The result: strong trends often show long runs of same-color candles with few opposite wicks. Choppy markets show small, mixed candles.
The catch: the open and close on the chart aren't real prices. You can't buy at a Heikin Ashi close. More in Heikin Ashi vs candlestick.
What each one hides
- Renko hides time and small moves. You won't see a sharp spike that reversed inside one box. You won't see how long price sat still.
- Heikin Ashi hides the real open and close. Gaps disappear. A real close past a level might not show as one.
That matters for our method. We only count a candle body closing past a level as a real break. On Heikin Ashi, the "close" is an average. On Renko, the brick only shows the box edge. Check the real close on a normal candlestick chart before acting.
One safe way to use them: keep a normal candlestick chart for levels, entries and stops. Use Renko or Heikin Ashi only as a second window for trend context.
The backtest trap
Both charts can make past results look better than they'd have been:
- Renko bricks can depend on prices that came later than the brick appears on a historical chart, depending on how the platform builds them.
- Heikin Ashi signals use averaged prices you couldn't actually trade at.
If you test a strategy on either, check it on real candles. See how to backtest a trading strategy.
Which fits you?
- You want a calmer view of the trend, with time kept? Heikin Ashi keeps the time axis and smooths the color.
- You want to ignore time and small noise completely? Renko does that, at the cost of choosing a box size.
- You're learning to read charts? Learn normal candles first. See how to read candlestick charts. Smoothed charts are easier to misread when you don't know what they're hiding.
Common mistakes
- Placing stops from Heikin Ashi prices. Use real prices from a normal chart.
- Picking a Renko box size until the past looks perfect. That's over-tuning.
- Trusting a smooth backtest. Re-test on real candles.
- Forgetting the news. Neither chart warns you about an 8:30 am report.
Questions
What is the difference between Renko and Heikin Ashi?
Renko draws a brick only when price moves a set amount and ignores time. Heikin Ashi draws one candle per time period using averaged prices. Both smooth the chart in different ways.
Is Renko or Heikin Ashi better for trend trading?
Neither is better for everyone. Both can make trends easier to see. Many traders use one for context and a normal candlestick chart for entries and stops.
Are Heikin Ashi prices real?
Not fully. The highs and lows are based on real prices, but the open and close are averages. You can't trade at a Heikin Ashi open or close.
Why do Renko backtests look so good?
Bricks hide small moves and, on some platforms, depend on later prices. That can make past signals look cleaner than they were. Test on real candles too.
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