THE HAnDbOOk Of TECHnICAL AnALySISvertical or price axis at different prices. Conversely, numerical and horizontal‐
based overlay indicators are not affected by the non‐linear axial increments on
equivolume charts,
Constant‐range Charts
On constant‐range charts, each bar, box, or brick is complete once a specified
excursion in price is met. Examples of constant‐range charting include Renko and
Point and Figure charts. Below are the characteristics associated with constant‐
range charts:
■ (^) The bar or box range is constant
■ (^) The bar or box duration is variable
■ (^) The bar or box volume is variable
■ (^) The transactions per bar is variable
■ (^) The bar or box volatility is constant
point and figure Charts Point and Figure charts represent the most popular
form of constant‐range charting. Once a specified amount of price excursion is
recorded or detected, a new bar is plotted. These bars are referred to as boxes.
Point and Figure charts are populated by continuation and reversal boxes. A con-
tinuation box specifies the minimum price excursion required for a new box to be
plotted in the direction of the existing trend. The reversal size consists of a speci-
fied number of boxes required for a reversal to be plotted on the charts. The size of
the boxes is arbitrarily chosen. For example, a $1‐box size requires price to move
at least $1 before a new box is plotted, and if the reversal size is 3 boxes, price
will be required to move at least (3 × $1) = $3, before a reversal may be plotted
on the chart. Closing prices are normally used to determine the completion of a
box, although many practitioners also use the high and low prices. Rising prices
are indicated by a column of rising Xs, whereas declining prices are indicated by a
column of falling Os. As constant‐range charts, the time axis is non‐linear and as
a consequence, geometrically based overlay indicators would exhibit inconsistent
readings. This is the main reason why Point and Figure charting uses a unique
form of trendlines which are not based on drawing a line between two points.
Only one point is required and the trendlines rise and fall along 45 and −45 degree
angles. See Figure 3.12.
renko Charts Renko charts are another form of constant‐range charting. The
Renko bars are referred to as bricks. There are bullish white bricks and bearish
black bricks. They are very similar to Point and Figure charting except that each
new brick is plotted in a new column. A new brick is plotted once the minimum
price excursion required for a new brick to be created is met. Since the creation of
a new brick is not time dependent, the time axis is plotted in a non‐linear fashion.
All reversals require price to move at least two bricks in the opposite direction.
Hence, Renko charts are essentially two‐brick reversal charts. Again, the size of
the brick is arbitrarily chosen. See Figure 3.13.