Renko 10

[Tygma]

Pipwoof: First of all…when I found your post mentioning that autoscroll had something to do with how many bars showing in the offline chart etc… That was a little epiphany at the moment. Not only for the renko chart, but also for my rangechart setups…Thumbs up for that one:)

Now, let me see if I can contribute a little…I’ve been following this tread for a few days and I thought I wanted to see where it was heading before giving you a little different angle of it. You are on a very different path than me when it comes to exploring the Renko and it’s usefull areas.
I have recently started using renko/range charts myself, but I don’t look for the holy grail setup on them alone…I’m not so sure it can be done either, to make a holy Renko Grail, but I admire you for trying and taking the time and effort to digg out the answers.
For now I don’t think that it’s necessary to give you a picture of the whole setup but I’d like you to know where the renko/range charts can be a pretty nice tool if used right.

Along with all my charts and timeframes I use Renko/Range charts ONLY to confirm entry and exit points.

Basicly - If a bullish trend is in sight, I wait for the renko/range bar to change color from red to green and build a new bar. For a bearish trend it’s the same but in the opposite way.
I also use MACD with the Renko/Range to confirm entry and exit signals.

Renko/range bars works absolutly best in a trending market, ranging markets…well, you do the math

As for exit signals I usually waits for a couple of reversal bars to appear before I exit, also confirmed by other indicators on my livecharts and a confirming signal from MACD on my Renko/range chart. The reason why I wait for 2 reversal bar is simply to confirm that it’s not a retrace of the trend.

This is just what I have on my Renko/Range charts. I use them ONLY to confirm entry/exit when my other live charts and timeframes signals that it is time to trade.

I’m sure you’d noticed that I write Renko/Range bar…and that is just because they are two pretty similuar indicators and I use them both from time to time.

And also…just a tip…something I discovered but not quite know how to benefit from yet… Try to take the ATR on the daily chart ofcourse, divided it into 5 and whatever pip value you get out of it use that as the boxsize value for Renko… It smooths out a little and decreases those anoying “ten pip” fake out’s when trending

And if my english/writing is bad today…sorry for that…I had a great battle with the EURGBP today and I am exhausted at the moment

[useless23]

My renko boxes don’t have wicks. I’ll give you an example of what I am proposing.

50 pip box size

Price falls from 1.3700 to 1.3650 thus creating another red box following a succession of red boxes.

Price is still above 25sma.

Price then rises by 100 pips to 1.3750 creating a green box.

What I propose is that you would put a buy linit order in at 1.3700 and set your stop loss at 1.3650.

[Darklighter]

Think of it as repainting. The price is currently at 1.3650 and it goes up to 1.3710. We have the start of a green box and the pending order has been triggered. The price now reverses, the green box is removed and a red box is drawn in its place. This is unfortunately how Renko boxes work. The only way you can see this repainting is to have whatever you use to make the Renko chart display wicks.

[useless23]

if price rose from 1.3650 to 1.3710, I would be looking to put a buy limit order in at 1.3650.

if my order didnt get filled and price hit 1.3750, then I would amend my order to 1.3700.

[useless23]

One would always be buying a 50 pip retracement after a full renko box has been painted.

[Darklighter]

Got it. Sorry I misunderstood. That’s an interesting idea.

[useless23]

When I look at price action using a candlestick chart behind a renko chart, I often see such retracements. If one were using a 25 pip box in eurusd and usdjpy one would see numerous 25 pip retracements after hitting a number rounded to the nearest 25 ie, 00 25 50 75 100

Eg, if price rose from 1.3700 to 1.3750, one could see price retracing to 1.3725 and then correcting.

[pipwoof]

You know, a grail would be kind of a personal thing wouldn’t it? I mean, if it was being passed around from mouth to mouth, you might wonder what kind of farm animal the guy before you had been smooching, right? Maybe we find it, hide it, and mark it, “for personal use only.” From a noble motive, of course, to protect others. Or, I suppose we could just load it up with government warnings, pass it over and say, “Drink at your own risk.”

Here is Renko with a smoothed Heiken-Ashi, which makes me think I may be getting somewhere. GBP/USD on a 10 pip box.

[Darklighter]

Very impressive looking pipwoof!

[pipwoof]

I am still digesting some of the contributions and appreciate all the valuable input here. As it’s supposed to be, we will each decide if this tool can do anything for us and, if so, will apply it in our own way. The dozen or so of us who formed our weekly trading group had little in common except the coffee and doughnuts for our morning meeting. But, we could be more detached and more objective about the other methods and provide a mix of critique and support. So be it.

With the offering of that last chart, I suppose that would be one of the simpler ways to employ Renko. Combine it with an indicator, pattern, whatever, and enter the trades when it all lines up. Manage the trades, try to maintain a good r/r. I may be doing some of that next week, but, thanks to the input here, I will be doing something else in consideration of what some of you have presented.

1. I believe there is an inherent advantage in the observation that, especially on smaller boxes, a bar of one color is likely followed by a bar of the same color.
2. Taking advantage of that note is inhibited by the way Renkos are built, resulting in larger losses than wins.
3. Completion of any Renko bar is often followed by a wick that takes price in the other direction, frequently capable of knocking out a close stop or proceeding all the way to an opposite color bar.
4. I would prefer something that is at least close to 1/1 or better and has a decent win rate.

Here is what I will be trying next week with 10 pip boxes. I have it from a pretty reliable source that the gbp crosses might be best, so I will be looking at gbp/usd, gbp/chf, and gbp/jpy. The Renko shade indi shows me when a color bar has completed. Since I am also looking at regular candlesticks, I can watch the specific price movement occurring behind the Renko. As a color bar completes, I think I know two things: 1. My next bar has a probability of being the same color as the one just completed and 2. Usually not before it does a retrace. Therefore, once a bar has completed, I will wait for a wick (retracement). I suppose the size retracement will be a judgment call and there will be times when there is no wick at all. I will miss those trades. If I see a retracement from the point of last completion, I will enter a stop order and enter if price crosses back through the last Renko completion point. Ten pip sl and ten pip tp and allowing for spread. That gets me pretty close to 1/1 and, if this probability thing holds up, may be profitable.

Since a picture is worth a thousand words, two thousand of mine, I will show you a winner and know that you will be able to find the losers yourself. Criticism anticipated.

[pipwoof]

Oops! Loss because, after retracement, price returns to a high that puts me long at the completion point, then turns against me.

[pipwoof]

Missed trade as price roars on through to build the next Renko bar and doesn’t leave a wick.

[pipwoof]

Great save, as Renko builds the green box, then drops to take out our stop loss. But, we were waiting for the retrace, entered as it went back through the completion point, and won the trade.

[pipwoof]

Outstanding! As Renko builds a short bar and follows it up with an almost 20 pip wick. Then, proceeds to complete the next red bar for a profit.

[LiquidGenius]

Hm interesting. So is this just like trading retracements and favoring current bar type then?

[pipwoof]

Genius, that seems to sum it up. I’m not yet ready to dismiss Renko or categorize it for limited use. I remain open to discovering a deeper meaning within the structure, but what we seem to have found so far is a template that frames price movement, creating a particular visual. To trade the way I last described, it might be just as easy to draw horizontal lines at the 10’s, 20’s, or other round numbers on our chart, watch for a breakthrough followed by a retrace, and enter on a subsequent breakthrough.

Renko aside, I have thought about what the underlying premises might be on trading like this. It would seem that we are trying to join a mini-trend signaled by a movement the size of our box. We are repeatedly joining and rejoining that trend as long as it continues, picking our entry spots based on retracements. Though we would miss some trades because wicks were not formed or we found them inadequate for our purposes, we would also avoid some complete reversals. In general, I think those are sound trading bases.

Another matter is whether the round numbers have any value as a fulcrum around which we can initiate our trades. I can’t contribute much here except to note some concensus that round numbers serve as s/r points, the larger being more influential than the smaller. As our little box may be viewed as a mini-trend, the 10 or 20 pip round numbers may be seen as mini-s/r points. If those premises hold up in practice, we have a tradeable method. That poses another problem, at least for me.

I live in central time and usually trade the NY session, starting about 6 am my time. If I intend to trade the pound crosses, I am certain to find more opportunity in the London. Look at the charts this morning from about 6:45 GMT. All three gbp cross pairs offered trading opportunties of four or five consecutive boxes of the same color. I am using 20 pip boxes on the gbp/jpy, 10 pips on the others. Starting at 7:35 GMT there were four consecutive up boxes on the gbp/jpy, making for an 80 pip move in about an hour.

[Relativity]

=) I am watching this thread as I’ve done a fair amount of renko work and backtesting;

Classical Renko uses either a fix amount for brick size or ATR to determine a dynamic brick size.

I don’t like it; I have justifications for doing so, so what I tried to do :
Goal : Create a Renko indicator that uses dynamic brick size
Subsequent Goal : Extract out repeatable profitable patterns
Construct from raw M1 data, in absence of raw tick data

-I’ve seen Renko and P&F statistics, but I don’t like their methodology as most check certain fixed patterns via brute force approach and don’t use a dynamic methodology to seek out fresh and unknown patterns.
-The problem is that its not easy to code, but doable (given the experience I had so far)
-Let the patterns tell us the rules of trading and not the other way around. Do not assume certain patterns are meant to work.
-Every instrument at any given time has different volume and volatility.
-A single weekly bar shows the most stable volume and is a key trend factor, as compared to daily and H4 bars
-Decided to use rolling M1 x 1440 x 5 (a week’s worth) baseline data to determine volatility and hence dynamic brick size.
-Due to CPU utilization and optimization, decided to only recalculate dynamic brick size every M1 x 1440 / at start of a standard trading day, to be used for the following M1 x 1440

Not easy work, but very doable. This is one of those unfinished in progress projects I have on hand.

[pipwoof]

In between trading and living, I continue to look into Renko charts. I like these things and really want to find a use for them that justifies keeping them on the platform. In this regard, I contiue to consider trading retraces using the Renko Shade indicator. Don’t overlook that one, there may be something to it.

Additionally, there is a ton of information on the web from various sources where I have found several things that look promising. There has been little that was specific enough, simple enough, and productive enough that I could offer here in good conscience. I have come away with one approach that looks right and is simple enough for a newbie. I will take credit for the presentation and small amount of backtesting, but, with all that I have found from others, it is highly unlikely there is anything original here. Consider it borrowed from public knowledge, but packaged for your convenience.

The idea is not complex at all, once you get your Renko charts built. Using a 10 pip Renko box, go long at the completion of the SECOND same color bar. Exit at the completion of ONE opposite color bar. For example, we would be going long at the completion of a 20 pip (two blue Renko bars) move and our stop-loss and/or exit will be at the completion of the next red Renko bar. We would most likely be entering at the open of the next bar following completion of our second same-color bar. In actual practice, we can preset our stop entries and sl. In the eur/usd chart below, we see the first sequence of five blue bars. Once we saw the completion of the first blue bar at 1.3920, we can set a buy stop at 1.3930 and a sl at 1.3910, which is where a red bar would be formed if movement reversed.

This chart covers 14 trades between 3-12 and 3-19, this year. Outcomes were: +10, +60, +30, (20), (20), BE, (20), BE, BE, BE, +10, BE, (20), +60, i.e., four losers for (80) and five winners for +170, net +90. Extending my count for the period 3-12 through today looks like this: 43 losers, 30 winners, 15 BE, losses (660), wins +1,050, net +390. I will add more in a subsequent post.

[pipwoof]

Considering this method of two to enter, one to exit, there is a fairly simple way to look at a Renko chart and get a quick back test. This will be obvious to some of you right away, but we can see our wins and losses by counting the number of same-color Renko bars in a row. A single bar has no impact on entry. Any sequence of only two will result in our maximum loss of (20) pips. A sequence of three will lose (10) pips. When we see four in a row, that is a break-even trade. Five will win us 10, six will win us 20, seven will win us 30…ten will win us 60. The chart above is eur/usd for the period 3-12 through 3-19 showing the consecutive color bar count. If you decide to play further with this method, do some research of your own. It may be less effective on some pairs. For example, looking at the gbp/chf from 3-12 through today, I count 58 losses, 38 wins, 16 BE. Total losses (920), total wins +1,240, net +320. Looks okay until you factor the transaction costs of 112 trades.

[useless23]

I visit this website on my phone so it is difficult to write at length but I would like to elaborate a little on why I don’t think there is an edge with renko.

I agree with the premise that it is 66pc likely that an up bar will follow an up bar and likewise for a down bar. Or to put it another way, there is always a 33pc chance of a reversal.

Supposing we are dealing with 50 pip renko bars, my contention and issue with renko is that one could enter the market at any point and there would always be a 66pc chance that price would go 50 pips in one direction before it went 100 in the other for the very simple reason that 50 pips is a shorter target than 100 pips.