Renko is somewhat similar to a ma cross over strategy. They work very well in long trends but are terrible when the market ranges. Just look at USDJPY this year.
MY APOLOGIES! I am deleting my latest posts here because I have noted gaps of missing data on my m1 charts. When these gaps are converted to Renko, they look like a long consecutive run. Not accurate. Sorry.
Pipwoof,
I manually back tested USDJPY GBPUSD AUDUSD by hand from September 2012 to near enough present day. If you like I can email you the spreadsheets? I used 50 pip boxes and the spreadsheets show the renko chart.
Iāve observed that each currency has at least 1 long trend a year and it is that trend which will put oneās account in profit. Perhaps if one aimed to make just 10pc profit per year on each currency then in theory one would stop trading altogether after hitting that profit target to avoid giving profit back in a ranging market as is what happened with JPY. Alternatively one could wait for a key major support or resistance area to give way before entering the market.
Useless, I appreciate your work and you may have better data than I do. I have looked at half-a-dozen platforms and they all seem to share large gaps of missing m1 data. This, of course, throws Renko into what looks like long runs of bars. Wrong! Check your data. When I have time, I may try to see what continuous pieces of m1 I have and if they can tell us anything.
The reason I chose 50 pip box size is so that it would be easier to backtest manually. I used a 1H timeframe to determine hits at the 50 level.
I started to manually backtest a system that painted an opposite colour when there was just a reversal of 50 pips to ascertain if there was an edge following the same colour but I gave up when the more I tested, the probability just got closer and closer to 50pc, which is consistent with the ealier post I wrote about why I donāt think renko has an edge.
I have been doing analysis on Renko type bars for a while. What I have seen that looks promising is trading from different levels of standard deviations. Or at least using these levels as areas to look for entries on a normal chart.
Smoky, thanks for giving us a different look at Renko. I am also looking into using Renko with other indicators. Will you elaborate on what you are doing?
I am pretty much just searching for anything to give me a statistical advantage. I have been downloading tick data, converting it into various bar sizes then looking at it with different indicators along with brute forcing patterns.
Try this one, impossible to backtest even manually. Put the zig zag on a Renko chart. The zz is, of course, a notorious repainter. It will mark the high and, when a subsequent high forms, just move to the new spot. However, when we see a zig zag high and the next bar forms short, it is harder for a new high to form and may give us a reasonable entry. Also, you might try smoothed heiken-ashi on Renko bars. This was an idea contributed earlier which referred us to Joseph Nemeth on youtube. Nemeth suggests a combination of indiās for entry, including ha on top of Renko.
Why is it impossible to backtest? I will have to look it up and see how hard it is to code, my simulations are done in programs I have written in matlab and C (I donāt trust MT4 analysis, at least for not for anything using tick data). I donāt have the data to construct HA candles, I am working off of just tick data and have removed the element of time, but I could probably try a fast moving average in place of the HA candles, since from what I can see, they are essentially averaged candles to show trend.
Maybe I am making an erroneous assumption about backtesting the zz. The thing is, it moves, i.e., repaints. Iām not sure how we could know all the places it was before it settles on that final location we see on the chart. If it marked a high and that was followed by a down Renko bar, we might consider that a valid short entry. But, if it then reverses and goes to another high, the zz will simply erase the prior high and repaint the new one. That would be a loss, but Iām unclear how we could determine that. I am certainly willing to stand corrected if someone has other ideas.
Darklighter, if you are still watching Renko out of the corner of your eye, take a look at this and give an opinion. Modifying your use of ema, the indicator here is the McGinley Dynamic Index. These are 20 pip boxes. Oh, and enter at the close of a Renko above/below the indi, use the indi for sl.
Hi pipwoof.
I recently discovered Renko yesterday. But I did hours of work with it today. You were on the right track with this post. If you are going to build a system around Renko, build it around this.
My findings:
Wick size does not seem to adversely affect the probability that the candle will close the same color as the previous candle on certain pairs.
Just wanted to expand my thoughts from yesterday.
At first glance, Renko appears to be flawless and a quick path to riches. But as has already been pointed out, an opposite candle takes 20 pips to form whereas a candle in the same direction only takes 10 pips. So while the āenter at market on candle close in the direction of closingā strategy may provide a small edge on pairs that tend to trend, itās probably so small as to not be worthwhile to pursue.
It quickly becomes apparent that Renko is not the holy grail in and of itself. But it is a tool, and a very useful one at that. Price accumulation areas, trends, and ranges are all very clear on the Renko charts. āFake-outā breakouts are very rare on these charts. So Renko definitely has merit as part of an overall price action strategy.
Potential ideas:
[ul]
[li]Put an order in the direction of the candle on a retrace of X pips, which will skew the R:R in our favor. For example, a 5 pip retrace would make the R:R 1:1. This could be automated.
[/li][li]Attempt to identify predictable patterns within the bricks which signal the most likely next move of price, these could also be coded into an automated strategy.
[/li][li]Use your discretion to identify trends. Obviously this will have to be done manually. From there, wait patiently for a retracement. Aim to pinpoint the reversal to resume the trend using your other tools (perhaps your favorite oscillator plus some price action). The more accurately you can do this, the tighter your stop can be - this translates to high R trades. Ride the trend and let it do the heavy lifting.
[/li][/ul]
Hi there folks, new to renko and after having watched the following Youtube vid by Joseph Nasreath www"youtube"com/watch?v=DOPfoN7dYpc I have decided to research further into using renko. (replace " with . as cannot post links)
The main thing I like about using renko is that it is not time sensitive, the bars are drawn after certain a certain number of pips. Using it on its own I think is on par with solely using candlestick charts without additional indicators and relying on candlestick patterns to enter and exit positions. It can work, doesnāt mean that it will work. Having used various resources from this and other sites I have managed to get my chart looking similar to how Joseph does in his YouTube video. I have 3 charts for each currency, the first (Master Trend) is a normal candlestick chart on the h4 timeframe, the second is a heiken-ashi chart with a 20ema attached to it, the final chart is a renko chart with macd attached to it.
For the rules to the strategy watch the video as they are all explained on there.
For me there is alot of potential with using this particular renko methodology as it removes emotion out of trading, no longer do you look to news to look at areas of volatility or technical analysis for retracements etc. You now seem to have an automated look to your positions. The only concern i have with this methodology is the fact you use no stop loss and that basically goes against most things I have learnt since beginning trading 3 years ago. I can see how you hedge positions and pretty much never lose money using this methodlogy but it will require a big leap of faith, which I am now willing to commit to.
Again I am new to this so am looking to learn with you. Watch the video fully to get a better understanding of renko if you donāt already and feel free to share resources so we can further enhance our knowledge.
I have attached a screen grab of what my setup looks like for the eurjpy. Feel free to comment and give advice and iām sure that we can, if we work together, maximise the potential of renko.
Singth
Thatās really interesting. But the idea of no stops scares me to death. Could wipe out an account in a day (or less!). How many trades are you entering a day? Certainly interesting but will take a lot for me to move away from the traditional support resistance approachā¦
Singth, if I am not mistaken, the āMaster Directionā chart shd be Heikin Ashi candle on H4 or D1 chart, instead of normal candlesticks
It looks like you have the same idea with renko as me. I dont really think the trend thing is the way to go with renko. I think its probably much better to just look to getting a single bar profit with a very high hit rate. This should be possible (at least thats what i keep telling myself). The problem with renko and going for those long trades is the 1 forward 2 reverse ratio. It basically means you are going to be either giving back most of your profits or turning what was a profitable position into a loss (And it could be a pretty big loss). Just look how most technical indicators behave on renko and you will see exactly what i mean. Good exits are pretty much an impossibility.
Renko is pretty odd though. I look at 3 point blocks (lots more trades) and it has given me loads of data to work with. The thing that really gets me though is you have NEVER seen it all with renko. For example many times i have thought i have had it cracked. Risk:Reward of 3:1 (Honestly i dont think you will get better if you want a good hit rate) and getting 20 wins to 1 loss. I have done this for a week consistently with 20- 30 trades a day and by the end of the week i think i have really sorted it. Then on Monday it goes to crap and i get almost all losses, same the next day. Do you see what i am getting at? A weeks worth of 3 point bars on something like DAX is several thousand bars all showing good results, then you can still realize that statistically it means nothing.
Hello All, Iāve been testing renko for about a month.
Iām using tradestation to perform tests and get to some brick statistics, and Iāve found some crazy statistics about this type of charts.
For example iāve tested on many brick sizes and different currencies and turns out the odds of having a single brick (no same-color-consecutive bricks) is around 10% across all pairs, I made this by creating an indicator to divide the āweirdā bricks between all bricks, some data goes back to 6 months on AUDUSD, EURUSD, EURJPY and GBPUSD.
That said, almost 90% of the rest of the bricks are 2 or more consecutive bricks of the same color, there must be an edge on that!
Iāll be following this thread because Iām looking for more Ideas, and Iām also willing to share and test more ideas to come.
Btw my username on meetpips is IamXavi, Iām posting there more relevant information.
In my testing I found the probability of a brick being followed by the same coloured brick to be about 67pc, which means no edge. Also, if you miss the big moves which occur during news announcements then that will adversely affect the return.
In my opinion there is no edge using renko because the odds of the market going in your favour by 5 pips rather than 10 against os always 66.6pc. The only advantage it offers is to see trends more clearly.
Good luck.