Crazy Profitable Renko System?

So I created another thread here on Forex Factory talking about how the concept of a 1:1 Risk/Reward ratio is unfairly scrutinized by the trading community in general and how most people don't understand the power of hitting 55-60% of trades with a 1:1 ratio. About a month ago I stumbled upon a renko video on youtube where a backtest was performed to see if a profitable system could be used by entering a trade after 3 consecutive bricks and exiting on the first reversal brick. I'll leave a link to the video below and also a screenshot of his results. To quickly summarize, the strategy he was using turned out to be around a break even strategy once commission and slippage gets factored in. I then took the numbers from his backtest and used the same strategy for entering but for exiting, I used a 1:1 ratio. Below were my findings based on the numbers he found in his backtest: (I posted this in the youtube comments section of the video but received no feedback or follow up so am also posting it here)

Renko 3 Brick Trend Strategy Test - YouTube


Assume the take profit level for each trade is 20 pips, or two bricks. This gives the system a reward to risk ratio of 1:1. This would also mean that every "break even" trade now becomes a profit because in order for the trade to be break even in the original system, the selected currency pair would of had to produce 2 bricks in the profit before having a reversal brick cancel out. Below is my math for the new 1:1 risk/reward system based on the data in this video:

Total Trades - 1885
Wins - 1222 (735+487)
Losses - 663
Win% - 64.8%

Now to find how many total bricks of profit we have:

1222 (total wins) * 2 = 2444. 2444 - 796 (bricks lost in video above) = 1648 bricks of total profit. Since every brick is worth 10 pips, we have a total pip profit before commissions/fees of 16,480. To be on the conservative side for commissions, I will use a 2 pip cost associated with every trade.

Cost for commission/fees - 1885 (total trades) * 2 pip cost = 3770 total pip cost Total pips gained from backtest - (16480 - 3770) = 12,170 total pips gained. Assuming 1% of account balance risked per trade, the net return over the 6 month period would be 635% Every 20 pips gained represents a 1% gain in the account, so we divide 12,170 (total pips gained) by 20 (1% gain) to get the 635% gain.

I'd love to hear any input about this and see if anyone else has any experience with this. I personally trade using renko/range bars but enter a trade based on pullbacks and don't something quite as simple as "enter after a third brick". All questions and comments welcomed!

Video strategy:
After 3 10pips renko bars TP is as trends holds and SL is 10pips

Your strategy (? - if I understand correctly):
After 3 10pips renko bars your TP is 20 pips and your SL is again 20 (1:1 ratio)

Fine for breakeven but what if goes one brick down and reverses you lose 20 not 10.

The video strategy is a trailing stop of 20 pips. He exits the trade after one reversal brick. For renko a new brick forms in reverse when it travels 2x the brick size. So for example, say you enter a trade 109.000 on USD/JPY and price travels 20 pips to 109.200. Then a reverse brick prints at 109.000. My take profit would of hit and the video strategy would be stopped out for break even. Does that make sense?

Your math is correct. The issue here are the Renko bars themselves, when generated backwards.
They are prone to smoothing whipsaws and showing trends, which do not exist, if they were not created from high quality tick data.

I don't know, how the bricks in the video were created, only a test with a proper Renko generator and high quality ticks would enlighten the dark here.

Anyway, your considerations on 1:1 RR are interesting, currently I am working on trading method, which has a kind of "natural" 1:1 RR.

You are correct with renko bricks printing incorrectly. I don't use MT4 and instead use Tradingview for my renko charts. I'm not sure what kind of renko generator was used in the backtest he perfomred but from the looks of it, he's pretty skilled and experienced with using EA's by looking at his other videos. Another fact that must be considered is that the backtest was performed during a pandemic with volatility at a very high level. Regardless, I would be curious to see if anyone else has any experience using this method or if they have any thoughts about it.

Greetings, your approach is very interesting, I just did an EA for renko graphics and I am using a 1: 1 ratio but I added martingale, even so I think that in the long term the 1: 1 ratio would be a winner as well as you propose it only that the benefit would be less

What I discovered is that not all pairs can use the same profit taking, for example in EURUSD I used a TP of 25 pips and a SL of 25 pips but in GBPUSD a 15 pip, this also applies in different pairs
I add that I use Renko Bars of 5 pips

This is all wrong. I think probably everyone posting in the thread has slightly misunderstood it.

If you use 10-pip renko bricks and close a position after one reversal brick is printed, that isn’t like a 20-pip trailing stop at all.

If you actually think about how it works, it isn’t too difficult to see why.

Let’s take the long entry-price as the close of an up-brick (it can easily be a fraction higher, in reality, but “to simplify”, anyway). Now see what happens when the price goes up 8 pips (no new brick is printed yet) and then back down 20 pips from there: a trailing 20-pip stop-loss will obviously close the trade, but the price-level is only 12 pips below the entry-level, so nowhere near the “reversal level” described, which would be 20 pips below the entry level (10 pips to retrace the entry-signal brick and another ten to print a new down-brick.

Very widespread misunderstanding of this dead obvious point is among the (many) reasons why renko-based systems are difficult for people to backtest: not usually because of software difficulties as they imagine, but simply because the people posting this crap on Youtube never have any idea what they’re talking about.

That’s also obvious, though: if they could trade profitably, why the hell would they be putting videos on Youtube?!



That’s probably why he can’t trade profitably.

People who are “pretty skilled and experienced with using EA’s” never can.

Their income comes from marketing, not from trading.