Because of the way Renko bars are drawn losers would be twice as large as winners when trading individual boxes. On a 10 pip box size for example, it takes 20 pips for a color change.
Maybe there is a use for renko if combined with normal price action & VSA. Finding patterns to exploit the market is all we need to have an edge. If this edge is different than other traders methods, then the better it is.
Thatās why Iām here! Iām always willing to give something a shot to at least verify if thereās something there for me or not. My past year has been filled with finding things not to do, so if this ends up like it, I wonāt be disappointed or consider it a waste. I believe all the knowledge stacks up eventually, even if I canāt see how just yet.
Ah thank you for the clarification (:
I try to be aware of a fine line between my disclosures that might actually help someone in their trading and what would be seen as mere self-indulgence just because I have the space for it. All I can say is that I mean well. If it doesnāt suit your tastes, speed-read or skip over it.
I once had an employee who was less than enamored with the way I tried to manage my business and her. She sought opportunities to remind me, herself, and others that she didnāt care for me or my style. In my defense, I never liked to let anyone go and believe it is an ownerās/managerās responsibility to try to find what an employee is good at and willing to do that would contribute to the organization. Once you determine that, give them that job description. I genuinely made the effort to do that with her. We maintained a tenuous relationship for several years and, while I canāt say she ever learned to like me, she did seem to find me slightly less despicable.
For one of my birthdays, she brought me a gift of a little desk plaque engraved, āAll I ask is an honest advantage.ā She meant it as a thinly-veiled insult, but I looked at it another way and kept it on my desk forever. Given the qualifier āhonest,ā that message nails me. Yes, absolutely, in any endeavor I can think of, I am looking for an advantage. I want it to be honest because I have a conscience and want to sleep at night, but I do want an advantage. I want an edge over the competition, over circumstances, over whatever stands between me and what I am trying to accomplish. These days, I want an honest advantage trading Forex.
Why would I believe an honest advantage might be found in Forex? Donāt I know that most traders lose money? Donāt I know there is a body of opinion out there that market movement is totally random and beyond prediction? I do know those things and cling to my belief that an honest advantage might be found because of the fundamental differences between a Roulette wheel and Forex.
An American Roulette wheel has eighteen black slots, eighteen red slots, and two slots that belong entirely to the house. Those slots are numbered, so making a so-called āeven moneyā bet, we might choose even numbers, odd numbers, red, or black. Assuming a properly engineered and balanced table, over the long term, we will never win. Itās simple. Itās basic. Itās pure. The wheel is a machine, a random number generator with no fundamentals and no emotions. It does precisely what it was designed to do, it spits out a number. Apply whatever betting strategy we wish, we will ultimately lose. With the American wheel, calculating the house edge for a bet that pays out even money is easy: 47.37% of the time you gain a bet and 52.63% of the time you lose a bet, making the calculation to determine the house advantage: .4737 ā .5263 = -.0526 (or5.26%). You can also say that there are 38 slots, two of which belong to the house, 2/38 = .0526.
There are those who insist on believing that certain mathematically structured events, like the outcome of a Roulette wheel, contain something that we might loosely refer to as āmemory.ā That is, āI have been watching this wheel for the past ten spins. They have all ended red. Surely, it is time to start betting black.ā In probability theory, a Roulette wheel demonstrates a concept called āindependenceā or āindependent trials.ā That is, each spin of the wheel is a stand-alone event. It is completely independent of and bears no relationship to any succession of prior outcomes. No matter how many reds have shown in a row, your odds of winning on black are still 47.37%. Failure to understand this or unwillingness to avoid itis what keeps all those pretty lights on in Vegas and Atlantic City. The quickest way to get your credit limit doubled at a casino is to tell the floor boss you have a system to use with Roulette. If you want your credit limit tripled, tell him itās a Martingale. Not only will you get your credit limit increased, you will get comped dinner and a room so you can play all night.
So, why would I believe Forex is any different than a Roulette wheel? We buy or we sell, we choose red or black, we win or we lose, but, in the end, the only one ahead is the Broker/Casino who just keeps taking their spread/vigorish. Why, indeed?
Because the Forex market is not an engineered and balanced machine. Because it does contain fundamentals and emotions. Because bars on a chart are not independent trials, they are often related to one another. Because the underlying influences driving priced o not enter the market suddenly. We will not typically see a 100 pip gap on an m1 chart. Like in the days when horse-borne messengers rode with news from one community to another, the market absorbs influences in segments and over time. Most often, the result we see is a series of bars, the number of which is a function of the timeframe we are watching. These bars tell us how the human participants are interpreting and reacting to the incoming information.
To drive home the point and just for fun, suppose the two charts on post one were a Roulette wheel and we quickly figured out that color often follows color. Taking the āspinsā on the chart, if my counting is accurate, we can see the results if we bet red following a red and blue following a blue. Based on being able to see the preceding and following spin, I get that we could make 39 even-money bets. I count us losing 12 and winning 27. Allowing for the house edge, our losses can be calculated at 1252.62=(631.56) and our wins would be 2747.37=1,278.99 for a net 647.43. Did I do that right? Probably close enough to make the point.
Now, donāt get excited and think itās going to be that easy. It isnāt. I wouldnāt call anything I have done in trading easy and darklighter and others have already begun to illuminate one of our challenges: We canāt get an even-money bet. What if we bet blue and the next bar is blue and we cash ten pips. Next time, we bet blue again and the resulting Renko bar ends red. We didnāt lose 10, we lost 20 because thatās how far price goes before it creates the red Renko bar. Now, that 30/70 advantage doesnāt exist anymore. It has become 60/70 and with the vig is a losing proposition. Hopefully, we will explore possibilities to overcome that and see if we can find our honest advantage.
I have admitted that my interest in Renko bars is new and I wonāt pretend to know that much. I am just fascinated by the way they seem to communicate those very attributes that distinguish Forex from Roulette. Unless I am deluding myself, I think I see the probability of continuation of those influences that move the market.
I will try to get more in over the weekend. I am open to your suggestions, insights, criticisms, etc. As Elvis said, āThank you very much. Good night.ā
Pipwoof,
You are a gentleman and a scholar.
Goodnight and have a good weekend.
Iāve been looking into using moving averages with Renko to try to come up with a system that would be worth trading. Iāve been using a 15pip box size and a 25 period ema. I wrote an ea that looks at only trading green boxes when the price is above the ma and only at red when the price is below, I came up with the following numbers between Jan 3, 2011, and Dec 25, 2013 on the eur/usd.
7,445 bars could have been traded, 5,725 would have won and 1,718 would have lost. The most consecutive loses was 5. Even with the losers being twice as large as the winners that would still put one at 60,105 pips in the green if you ignore the spread. This might be worth looking into some more. Even with the spread that would be a pretty significant win.
Good work dark lighter.
What was your 25 period ma based on?
THAT solved one of my issues Iāve been working to figure out latelyā¦THANKS BRO!! 
I was drawing short term trendlines and I wanted an easy way to automate it so I put a bunch of maās on the cart. The 25 came close to what I was drawing as far as entries go, and also avoided a lot of the chop of shorter term maās.
I definitely think it makes sense to only take trades in line with the ālongerā term trend.
I ran my program on Jan 3, 2011, to Dec 25, 2013: GBPJPY, with a 30pip box: WIN = 2079 LOSS = 607 CONSEC LOSS = 4
Thatās going in the direction of the 25ma. This is looking pretty good to me. Iām going to make the ea take trades and run it on a demo account this week and see how it works. Iāll probably drop back down to 15 box size and run on 4 or 5 pairs to give it a good test.
easy way to scroll back:
after turning off the āAuto scrollā button, press and keep down āHomeā keyboard button until no other data is received after 5 seconds.
- did not show up in the āIndicators->Customā drop down menu at first
- opened the relative menu from the āNavigatorā window; the indicator appeared as grey (therefore assumed inactive), see attached image; did not bother to continue
tonight, instead of drinking and listening to loud music as a prayer to Saturday nights, i decided to stay in until i find what i was doing wrong; this time, followed the step-by-step instructions provided here, same thing: grey (inactive) indicator.
as there was nothing else to check, started fooling around with the grey indicator just to find out that:
by right-clicking on this party-preventer and choosing āAttach to chartā will do.
ps. now it appears in the āIndicators->Customā drop down menu too
Before I get into our next related topic, I want to take a moment to thank those of you who are using your time to participate. It is gratifying to see a group of similar minds come together in search of answers. Especially when I have been very explicit that Iām not sure what Iām doing and we may not really find a pony after we make the effort to shovel away a mountain of horse manure.
Specifically:
Useless, āYou are a gentleman and a scholar.ā Good insight, nice compliment. But, I also believe it takes one to know one.
Scorpio, āTHANKS BRO!!ā If it helped you solve even a little problem, I feel good about that. Youāre very welcome.
Tyrone, āMaybe there is a use for renko if combinedā¦ā This is the spirit of investigation. The willingness to start with āmaybe,ā āpossibly,ā āI donāt know, butā¦,ā is evidence of a secure ego and little fear of rejection.
Darklighter, āIāve been looking intoā¦ This is looking pretty good to me.ā And this is the spirit of sharing. Hey, I have found a little something and am willing to pass it around. That facilitates an environment of exchange. Now, if someone else finds a little something, they are more likely to share because he did. I want to go more into this in another post.
Genius, āIām always willing to give something a shotā¦I believe all the knowledge stacks up eventuallyā¦ā I would like to go on record as predicting your success in life. This is an attitude that results in a lot of favorable outcomes.
We have the makings of a pretty good team. I canāt wait to see what we come up with. I remember the story of a speaker who was given a lavish introduction. He took the microphone and said, āGee, after that intro, I canāt wait to hear what I have to say.ā
Etfak, I have a number of grey indicators and grey eaās on my navigator. I donāt think it means inactive. I think it means we donāt have access to the source code. A double click, left button, or drag and drop should open the parameter window, allow you to make your selections, and attach to a chart.
If you right click on any of those gold indiās and select āmodify,ā it will take you to the source code where you could rewrite and recompile the program if you wanted. However, if you right click on a grey indi and select āmodify,ā it will be a dead end.
Iām going to offer an opinion on this sharing business here, but I want you to know that I am not all that sure. It sounds right, but I would appreciate anyone with a different perspective chiming in. Hereās the question: If we āovershareā are we giving away an advantage we worked hard to obtain? Or, is the market a vast ocean in which our little methods and the number of people we might share them with are an eyedropper and just donāt matter?
I have heard the presumption that if a method is truly successful and too many people get on it, the market will adapt and turn it unprofitable. One thing I am certain of is that the market is going to change anyway and systems that were once profitable will become useless. Just like a bookie changes the spread when too many bettors come in on one side of a proposition, the market functions to maintain a balance between buyers and sellers. There will never be enough traders operating a system that dominates the market because there would be no one to take the other side of their positions.
The volume of the market, the variables involved, and the personalities participating all suggest that it would take a hell of a lot of traders doing the same thing at the same time to create a major shift in market dynamics. My view is that a group of buyers coming into the market at the same time would actually drive prices up, rewarding the positions taken, at least until the buying pressure is absorbed. In order to reverse that, the volume would have to be such that it started to dry up the pool of sellers and prices retreated to once again attract those sellers. But, what kind of volume would that be in a multi-billion dollar daily arena?
Furthermore, the fundamental and emotional factors underlying price movement will probably always outweigh a little system that a few thousand of us might find useful. I have learned that when someone is keeping something to themselves, it is either because they are concerned about losing an advantage or, more often, because they want to sell it, not share it.
The secretive motive is common, but mostly a favored tactic of marketers who want you to feel that, if you buy this, you are going to be part of a special, elite group of insiders privy to what others donāt have. And, since it is so easy and effective that it would totally upset the market if too many people got their hands on it, they will sell only a limited number, so, better hurry.
So, at this point, I believe in sharing. Maybe thatās what I want to believe, but I am open to changing or, perhaps, finding some middle ground. Am I just being naive? Tell me what you think.
There is another post on something I am looking into that I do want to share next. Then, we will start organizing our thinking and getting into the specifics of how we might use this Renko. Though it does seem that darklighter is already onto something we will want to pursue.
Iām kind of like you when it comes to sharing pipwoof. Iāve been working on a lot of things and kept it all secret because Iām not sure if any edge I find will disappear as soon as its out in the public. I have however switched to studying only Renko and Iāve decided I will share everything I find.
Iām beginning to think that its 100% impossible to come up with a strategy that is so good that anybody that trades it will become a millionaire in just a few years. I donāt believe that there is any flaw in the market that large. So no matter how many of us retail traders trade a given strategy, the amount of money we will take out of the market is insignificant to the bigger players. I do still have hope that we can come up with something that is good enough that we will all be able to retire in 5 or 10 years down the road, and Iām convinced that Renko is a good start.
Also, Im sorry to say that there was an error with my program. When I changed it to make trades I discovered that the counting is off. Itās getting late here and Iām feeling a bit under the weather but I will try to fix the code and post updated results tomorrow.
I admit, this has nothing to do with Renko. But, I canāt resist telling you about it and I can flimsily justify by pointing out that I was speaking of sharing and this story is about that. After which, I promise, I will try to stay on point and help us discover Renko. Before I head down this brief side road, please be sure you understand the next few statements. I am no guru. There is more I donāt know than I do. I make a lot of mistakes and go down a lot of blind alleys. What I am about to cover is in no way an endorsement or recommendation of anything related to the information I am going to provide. The jury is definitely still out on this one and I have been burned enough that I always look a gift horse, not just in the mouth, but under the belly, up the tail, etc. I am terribly curious to find out if this is genuine and if it might be a great example of sharing.
I want to make every effort to avoid violating any BP policies on referencing other sites. So, at this point I will just say that there is a website that purports to tell the story of a group of young Indonesian gamers who shifted their attention to Forex and are wildly successful. Is that a great premise, or what? Being naturally suspicious, Iāve been trying to figure their angle. I donāt see that they have products for sale, other than referrals to brokers who may pay a kickback. No eaās, no indiās, no trading courses and this statement: āOne thing for sure, we do not manage funds. So, please, stop asking us to manage your account.ā So, whatās the gimmick? How are you going to try to take something from me?
Well, as Genius might say, āIāll bite.ā I signed up for membership. Free. Aha! Youāre probably going to sell my email address as many times as you can. But, if thatās all your profit motive, go ahead and join a few thousand others who already have my email address and who send me so much junk I can hardly find a real communication. Could that be it? I looked into their āDaily Outlookā and āMarket Updatesā sections and found a lot of very pertinent information. Free. I subscribed to their memberās section āPremium Daily Signalā where they make very specific trade recommendations. Free. Lastly, I subscribed to a signal copying service and attached it to a high-dollar (wishful thinking) demo account. Free. I activated that signal copier on April 8 and it has traded seven times. In dollars: +1,974.44, +1,450.86, +463.50, (-632.24), +1,205.88,+1,533.15, and +1,336.05. Fluke? Money made only to be given back because of the flawed nature of the system? Prelude to lure me into something else?
All Iām saying is that no one on the other end has a credit card number from me. And, if I am understanding this correctly, the signal service started six weeks ago and has over 4,000 subscribers. On my Oanda list of signal providers, that service has more subscribers than any other and the service in second place has 565. Is it possible that these guys are for real? Is it conceivable that they are going to share an effective approach to trading with any number of people who want to jump on with them? Is it even imaginable that they are going to do this for free? I just know thereās a trick up their sleeves somewhere and, when I learn it, I will certainly tell you about it.
Meantime, here is what I intend to do. I will pursue the signal service on demo for a couple more weeks. If it continues to perform, I will move to a small live account and trust them with maybe $500 or $1,000. If the account doubles, I will move my original stake and play on winnings. If that happens, I will tell you. If anything other than that happens, I will tell you.
Just wanted to say thanks Pipwoof, darklighter, and others on here that take their precious time to help others. I donāt say much but want yāall to know Iām watching and learning with great interest.
Darklighter, thank you for the input. I appreciate the position at which you have arrived. So sorry about the error with your program, but I know you are looking to see if anything can be salvaged.
As unlikely as it seems, if the story about the Indonesian gamers turns out to have some truth, it will be a great example of fearless sharing. The idea that someone found a working approach and is willing to share it with an unlimited number of others is romantic and appealing. Like those enticements that start with ā100 pips a dayā or āeasyā there is still a little part of me that wants to believe.