I believe renko is quite cool for discretionary trading, the S/R levels look incredibly good and also the trends look easier to follow, however I’m backtesting a lot to find an automatic approach, here’s another interesting fact:
Doesn’t matter the brick size or currency pair you use, the odds are similar on all levels.
Just found the odds of getting 2 consecutive bricks (3 or more not included).
On AUDUSD 10 pip Brick 6 months of Data 42.82%
On EURUSD 10 pip Brick 6 months of Data 44.44%
On USDCAD 3 pip Brick 6 months of Data 44.89%
On EURJPY 15 pip Brick 6 months of Data 45.99%
With respect I don’t accept those statistics. If they were true then it would be true that there is always, roughly, a 55pc chance of reversal which cannot be right because the odds of a reversal are less.
Maybe I didn’t make it clear, those are odds of 2 consecutive bricks only, not 2 bricks with reversal, it could go on or it could reverse it didn’t matter for this study.
That gets us closer to the 100%, the rest are 4 or more consecutive bricks, odds must be close to 30%.
BTW I got almost exactly the 66% stats you mention using an EA, 64%-70% winning trades, however using that EA theres a lot of data that’s not being counted (those long runs in bricks), maybe that’s why the odds are different, I wasn’t trying to make a system straight ahead but trying to study the chart itself, I used an indicator and divided the ocurrences between all the data.
I manually back tested 50 pip renko charts using tick data on a few pairs. Got near enough the same result from all. It is 66pc to 70pc likely that the same colour brick will follow I.e., if an up brick prints then it is 66pc likely that another up brick will print rather than price falling by 100 pips causing a down brick to print…
…and this goes back to what I was saying earlier. You could enter a market at any time with a profit target of 50 pips and a stop loss of 100 points and the odds of you hitting your profit target will always be 66pc (1/2). Conversely if your profit target was 100 pips and stop loss 50 pips, then the odds of you hitting your pt would be 33pc (2/1).
Following what you’ve said I have not found any conclusion about using naked renko due to the wicks not included in the study, however I’ve seen most of the time (over 50%) a SL that big is just waste, but I did it manually and I would like a better approach so we could get trustable data and I just don’t know how to do it.
Also, the only system I’ve found profitable using renko is keltner channels, so far all months profitable and a respectable equity curve.
UL & FS
I’m not sure what you are using to get your statistics. I use sequential counter. It tells me how many groupings and how large(up or downs ) they contain. So many of the renko size are pretty much the same, except for the 12Pip/12.5% & other [B]micro brick[/B] size calculations: for instance the 12pip/100% renko will show, counting 1-3 Sq’s up is 67% for the first 3, Where as the M4 is 26%. I think your chances of not flipping back and forth are better with the M4. Don’t miss ubderstand me , I have just started with this line of thinking. Now to find the best indicator or EA.
I have adjusted my EA to skip the 1 or 2 or 3 which means you get in on the trade 3 bars late & out 3 late. this the challenge
for the indicator/ EA.
Ps : FS, i just saw your last post & I agree KC is the best & controllable, EXCEPT on the [B]micro bric[/B]k, for that I use Lukas indicator for tight turns.
PS: UL, I have a script that creats renko bricks for the M5 offline charts which allows you to auto backtest. What do you use??
I’m sorry, I’m using Tradestation to put my statistics, what’s the difference if you use M3-M4 etc in MT4?
I’ve made several test and found no profitable way with renko, specially with small bricks because spread makes things worse if you trade with too small bricks or too often, even wih keltner channels, so the best choice IMO is to increase brick size to even 20pips to mitigate the spread and splippage.
Also it would be great to backtest using wicks, if you aim for 2 consecutive bricks with a SL half the size for a brick against you it may be possible to profit, but I can’t backtest that.
Renko will give you one thing and one thing only: the discipline to stay in a trend. If you get lucky and pick a good trending security like gbp has been over the last few years then you’ll do well but when the market gets choppy expect significant drawdown
looks like this thread has been sleeping lately. It is an interesting story how I got here, but more on that later.
After going through the procedure and successfully setting up my very own renko charts, I have come to the conclusion that catching trends is a lot easier this way. Trend lines, S/R levels etc are much much much more defined.
I do have one question though. Will my renko charts be updated live as price moves up/down, say, 10 pips?
Or will I have to create an offline chart every time and open it after a new level has been reached?
If they dont update live and I have to watch the price on a default chart, wouldn’t it be easier to just draw horizontal lines on my chart??
I’d like to add something for future visitors.
Most Renko tutorials will tell you to preferably use M1 charts.
My M1 chart only scrolls back a few days so I had only about 20-25 bricks on my Renko.
Because Renko only uses price movement and not time-frame, I decided to try it out on M5 and M15 charts.
It is the same… I compared the three charts and they look the exact same.
So if you’re having a problem like mine (have only a few days of M1 data) then go ahead and use M5.
My 5min scrolls back a good 6 months which, I guess, is good enough to start testing Renkos.
Hope this was helpful.
UPDATE: After manually comparing Renko with candlestick charts, I now know why it is recommended to use M1 TF for calculating renko. When you use M5, it has problems interpreting those long (40-50 pip) news candles that pop up so often.
This problem arises on using M1 charts also because the price moves that much in only a few seconds. Means it can move a great distance in that single 1 minute candle.
But I guess using 1-minute chart could be a tad bit more accurate.
I like using 3 different methods for trading Renko. I use a simple 13 period EMA and a 2 brick change in color, the cloud cross over with lagging line confirm and DDC for break outs. If interested in more details of the systems let me know. Cheers
It’s better to use Renko chart on tick data. Only tick based Renko charts will give you the full benefit of correct price movement. Time aggregation creates Renko bricks after the time passed you chose for the aggregation. E.g. if you choose one minute for your time aggregation, all Renko bricks, that would have been created based on price movement, will be plotted at once after one minute.
there was a Renko Charting Suite presented over 10 years ago which solved these issues but now it is unavailable due to changed ownership of its referenced homepage. I have it but I cannot download the suite. Why must we always reinvent the wheel ? Anyway, I have now collected over 10 Renko methods and will be demoing each one in turn. I will await your work with great anticipation !!
