Animal Farm (Renko system)

Animal Farm.

Read the book and figure out who the pigs are. Let’s make some pork chops.

Please note that there is an error on post # 264 on page 14.


Here is how it should read:

"The first rule is:

A new LH cannot be identified until price moves past the previous low.
A new HL cannot be identified until price moves past the previous high.

To make charts easier to interpret this, I use Bill Williams Fractals to identify the LL LH HH LH turns in the market."

*******************************************************************************************************************************

This thread is a place where we can try to develop some new ideas for trading Renko, particularly Median Renko Charts.

I have read over the other Renko Threads on Forex Factory and as I like to give credit where it is due I suggest that anyone who has little or no knowledge of Renko gives those threads a visit and studies the materials there.

I will cite sources for any tools that I use here, particularly the various eas that can be used to draw Renko Charts on MT4. In doing so, I thank the programmers who have labored over these and salute them for sharing so generously.

I am not a person who particularly likes indicators. I would rather develop my own understanding of price action to the point where I don’t need a lagging indicator or, worse yet, many of them. Price is what I use to make my decisions with. Having said that I do have indicators on my chart for two reasons:

1. I like an indicator that helps me determine if I am in a trend or a counter-trend move.
For this, I use a 5 34 5 MACD, with a 5 period EMA superimposed on it. I like the 5 34 5 MACD because I can use it to count Elliott Waves. More simply it is used to easily identify trend and counter trend moves. I am a big fan of Elliott Wave Theory but I will really simplify that, just as Renko simplifies a lot of things.

If you have Elliott Wave issues I sympathize. I see so much Elliott Wave Analysis by people who are just bull artists, and the whole subject gets a bad name. I use Elliott Wave analysis; it is not a simple topic. I will try to make it very simple. If you object to Elliott Wave move on. If you have an open mind, let’s see what I can teach you. I will say right now, that I am not here to debate the topic of Elliott Wave with naysayers. It is very useful to me. If you have an issue with that - go somewhere else.

2. The De Mark/Mouteki indicator draws Trend lines that are appropriate.
You can soon draw these trend lines properly yourself and the De Mark Indicator is no longer needed. It is nice to keep it around as it does some work for you and it also sounds an alert. It also locates Fractals and some pivots. Fractals are really magical but again, like Elliott Wave, a lot of people don’t understand Fractals.
3. Fractals. Chart decorations or symbols that draw your attention to important places on the chart? You can easily train your eyes to find Fractals and pivots on any chart, including Renko charts. Do you need to have them drawn on the chart? Personally, I am trying to get away from all the tree ornaments that people hang all over their charts. I think that in due course that the fractal indicator will no longer be needed on your charts. Your choice anyway.

4. Renko. Anything on a chart that is not price is superfluous in my opinion. Renko is purely price.

I have no doubt that people will turn up with all kinds of indicators.

Here is something that I would urge all traders to try. I think of it as the acid test for indicators. It is from page 85 of Bill Williams’ book, “New Trading Dimensions.”

“It is possible to trade profitably using only this oscillator and without even knowing what the current price is. … Think about other trader’s reactions when you say that you can trade profitably without even looking at the price chart or asking the current price.”

I have been at this for a long time and I have developed a lot of indicators and tested hundreds more. If you have an indicator that meets the above standard it will be of interest, otherwise it is not.

Final word on indicators:

Later, I will use indicators that give an alert at places or conditions on the chart where I need to pay attention. I am a busy person and I do not want to sit and stare at a computer waiting for something to happen. I like to hear a preliminary alert and then a confirming alert that tells me a trade opportunity has arrived. I think of these more as alert systems than indicators.

I will get to those alerts, but not yet; one step at a time.

******************************************************************************************************************************
5 34 5 MACD with a 5 EMA superimposed for analysis.
De Mark Trend Lines and Renko for trading signals.
Fractals at turning points.

Eventually it will just be the Renko chart, the MACD and a couple of alerts that prove to be useful and your brain.

******************************************************************************************************************************
Indicators, scripts, templates and PDF files will all be posted here:

Some good scripts, to help manage the trades:

Clean up all objects. Close and reverse. Close all orders specific pair.

(Additional scripts will be added later.)


Optional:

Profit Tracker. To keep track of how we are doing.

Post 2.

Getting set up.

It is really annoying when someone joins a discussion and demands that everyone stops what they are doing to answer a question that that has already been covered. If you have had a post 2 referral, you need to read through this material and probably the first post above as well. (all the indicators, scripts and PDF files are there.)

I believe that a lot of the annoying questions people will ask can be answered with a post 2 referral.

(I will try to add a FAQ at bottom of this page if I can access it and edit it.)

*****************************************************************************************************************************
Acknowledgements:

All of the indicators, scripts and the Renko eas are from Forex Factory sources and as such I believe they are public domain and free for others to use.

I would like to thank Fxred for the RenkoLiveChart_Better3.301_fxred ea.

I would also like to acknowledge the programmers who wrote the De Mark Trend line indicator and the useful scripts.

Additional thanks Bill Williams. "Trading Chaos" is the best book I have ever read about trading.

*****************************************************************************************************************************
Renko Basics and setting up the charts:

Read the Renko basics and setting up the charts PDF attached to the first post.

(Differences: You will have to add the RenkoLiveChart_Better3.301_fxred ea and look for a M6 chart, not the RenkoLiveChart_v3.2 and M4 as the pdf says.)

Minimize the M1 chart. Its only purpose is to feed data to the offline M2 chart. You need the M1 chart open to make this all work, but other than having it to host the Renko EA, it will not be used at the present time.

*******************************************************************************************************************************
Scripts.

Copy the scripts from post 1 into the Experts Scripts folder in MT4.

I like to keep the scripts that I use most often in the Favorites.
While MT4 is running, go to the Navigator and select Common, then Scripts. Right-click on any script that you want to add to the Favorites menu. I suggest that you add all of these scripts to favorites, as you will use them frequently. Experiment with them and get used to them before you use them in any trades.

*****************************************************************************************************************************

Template: If we all use the same template it is really helpful when we discuss a chart. The #RenkoLite template is in post 1.

#RenkoLite is Median Renko with De Mark only. MACD will come later.

*******************************************************************************************************************************

KISS.

Some people have charts with so many indicators on them it is nearly impossible to see the price. Those charts will get a KISS post 2 referral.

Keep it Simple Simple.

*******************************************************************************************************************************

Posting Charts:

If you want to post a chart on the discussion board, and you don't know how to,read the "How to post charts PDF in post 1.

******************************************************************************************************************************
Market Hours:

If market times confuse you: (I keep this on my browser task bar.)
http://fxtrade.oanda.com/analysis/market-hours


******************************************************************************************************************************
Summary:

1. Read the Renko basics and setting up the charts PDF.
2. Get your EURUSD M1 chart open. Hit home until they won’t let you get additional data.
3. Add the RenkoLiveChart_Better3.301_fxred ea to your M1 chart. (God Bless that man.)
4. Right click. Select Expert Advisors Properties. Make sure that it looks like the picture below.
5. Wait a few seconds for the EA to start working.
6. Check the upper right hand corner for a smiley face and then read the upper left hand corner.
7. Go to File, open offline, scroll down until you find the EURUSD M6 chart and open it.
8. Open the #RenkoLite template on your M6 EURUSD chart.
9. Minimize the M1 chart do not close it. It is needed to feed data to the offline chart and is essential.
10. Make sure you are opening the M6 offline EURUSD chart and still have your M1 EURUSD chart running with RenkoLiveChart_Better3.301_fxred ea on it.
11. If you can’t get it working read the PDF again.

*******************************************************************************************************************************
FAQ. (TBA)
**********************************************************************************************************************************

OK let’s start with very clean charts.

Let’s also keep it polite and positive. (Slagging lawyers is allowed if/when you need to vent any frustrations.)

Renko first.

I will start with the EURUSD - showing a 4 pip block Median Renko chart.

If you have installed the ea and the #renkolite template your chart should be similar. (Your broker's data may cause some differences.)

The chart shows a wealth of information, but it is late now and I have to take the dog for his walk.

It is raining and the dog was not enthusiastic.






Have a look at the wicks in the chart and how they relate to fractals.

Any observations?

Fractals would be excessively laggy as a trigger indicator for renko charts.

They don't form until 2 closed bars after you actually see them...where would you be with an entry?

Link.

Hello Magix.

Thanks for asking that question and being my first poster on Animal Farm.

I agree, fractals are lagging because of the fact that it takes at least five bars to form them.

Renko is good in that it removes a lot of the fractals that form on a time based chart.

The use of fractals will be a part of my method here and I hope to show some really good ways to use them. I use fractals to help identify the Elliott Wave structure in the chart. They are excellent when it comes to identification of the trend, potential breakouts and stop locations.

Bill Williams states that between every opposing pair of fractals there is an Elliott Wave of some degree. They are very powerful in that respect. I don't want to get into EW too heavily here, just touch on the easy useful stuff. If you can make it work you don't have to know why it works - unless sort of thing really intrigues you.

Fractals are also used to draw trend lines. (When we add the De Mark indicator to the chart, that use of fractals will become apparent.)

If we look at the above EURUSD Median Renko chart, the wicks often form at the middle or peak candle of a fractal, or on the next candle past it. That effectively tells us that a fractal is forming one or two bars ahead of its actual complete formation. Of the twenty five wicks on the chart, only four did not identify fractals. So the wicks are a reasonably good alert that a fractal is forming, before it actually does. That in itself is a heads-up and removes one or two bars of lag.

I haven't done a statistical study on that occurrence, maybe someone would like to at some point.

Anyhow the use of fractals will be a feature here and at first the lag aspect of the entry may be annoying but it can be improved on as we go.

I look forward to a fresh new market perspective.

Here is one important use of fractals: Identifying the trend.

(I am using the USDCAD to illustrate a nice trend here that yielded some good trades today.)

HH = Higher High. HL = Higher Low.



Forget "trend" indicators, price action alone tells us where the trend really is.

Renko, De Mark trend lines and Fractals. We will put them together next, but it is nearly midnight Mountain Standard Time and I am signing off for now.

Hello WAB,

This indicator could help newbies to indentify trend like in your previous picture!

Hope it will be of help,if not I will remove it (just say it WAB)!

Highest regards!

Thanks Zokynho. I actually have a similar indicator and use it myself. Yours is a bit better actually.

However you have to follow the rule that a new LH cannot be verified until price has broken out below the previous LH.

The indicator that I have and the one you have posted do not do that. If I could find an indicator that actually did follow that rule, I would absolutely use it.

Have a look at the chart to see what I mean.




The black LL LH labels are the ones that I have determined. Your indicator and mine both label the fractals the same way. I put yours on the chart to illustrate the difference between an indicator labeling LL LH or HH HL and doing it yourself.

I added horizontal red lines to show where the price breaks below each LL. There are nine that have broken down and one still pending if the down move continues. Eight of them are in profit the ninth is in a small loss position. Stops are moved down on each of the LH fractals as a new LL fractal breaks out.

I added vertical lines from the entry levels to the close to see what each trade is currently worth. The stop at the most recent LH is about 40 pips, so if the market decided to go up now, the last opened position would lose about 60 pips the second last one would break even and all the others would end up in a profit.



No indicators required.

Nine trades, eight with locked in profits, one potential break-even, one small loss if the market turns up and a pending tenth trade if it continues to move down. Renko makes this much easier to do than on a regular chart.

Fractals are very useful but the correct HH HL LL LH count is what makes it work. Learn to count the HH HL LL LH properly and you will be miles ahead of most people trying to trade. You will also be half way towards discovering Elliott Wave all by yourself. Soon you don't even need the fractals on the chart to do this.

I hope the charts are not too confusing. When you have done this for a while your eye is trained to pick it out easily. It takes practice.

Hey Wab,

Thanks for great explanation and your time.I understand what you mean and definately agree with you.

For renko we don't need indicators as many of them showing the same thing as renko.We need to learn about PA (when is market trending,when is in range periods and support and resistance zones) and all will be good.

I also like to use one higher brick size renko for longer term trend and one smaller to go with trend!

KISS principles are best,

Wish you luck with your thread and many green pips

Highest regards!

Thanks Zokynho.

There was a FR Scanner indicator, posted on FxRed's thread, that supposedly shows the status of the different block sizes on you chart. I haven't had a chance to really check it out and see if really does what it says it does.

When a bigger brick swings into line with a smaller brick breakout it is powerful stuff.

I will start into the De Mark lines next.

Good luck with your trading.

Subscribed

Looking interesting WAB. I'll follow along.

Might be worth letting people unfamiliar with Renko on MT4 that the charts won't load when your broker is closed.

The Renko EA needs incoming ticks to work, so if you're loading this up on a weekend, you'll have to wait for the Sunday night open, or use one of those bits of software which sends "fake" ticks to your terminal.

No-one had a go at this, so here is what I see.

Wicks that form AT a fractal - these signify valid fractal.

Wicks that form at bar 4 of a fractal - again, these signify a valid fractal.

Wicks that form on 3 bar reversal - assuming I understand what you mean by 3 bar reversal - these seems to fail, as far as formation of a fractal goes, and are therefore potentially good indications of continuation......

Hey wab,

Good work!

I am exciting to read the Entry/Exit rules because i am a renko fan and trade my own system which is also based on renko.

Best Regards,
PrinceWahaj

Wab...

I must be missing something. (No real surprise there)
You mention and marked 25 wicks, yet there seem to be other wicks on the chart. What is the criteria for a "wick". Is it only when it is against the current direction (showing a possible reversal in sentiment)

Hi spyderman and Gt3Rs

I assume that you mean the chart on post 4. My old eyes are not what they once were, and I did miss at least one wick that I noticed on a re-examine. Maybe I missed more?.

What I am trying to point out, is that when you get a wick in a median Renko chart and it forms on a brick with a color change, it is often serving notice that a fractal will form there, before the fractal is actually confirmed. This becomes very useful later on.

Sometimes the three bar reversal, like a fractal but with only three bars, is also significant. At the moment I am not explaining it that well. Once we get in to some charts I hope I can use actual examples to make things more clear.

Meantime if you look over the pdf attached, you may notice that some of the De Mark Trend lines are drawn form fractals and some from ... let's call them three bar patterns. Consider that a lot of De marks points, from which he draws trend lines, are actually part of a fractal anyway. Maybe that helps.

I am sure that the charts will provide many examples.

Here is a chart where the De mark points are shown as small circles. I have also displayed the MT4 Fractals and you will find three De Mark circles that I have labelled that are not fractals. (There are more than three, I just selected some for examples.)



What we are going to do is anticipate where De Mark lines will be drawn before they are actually drawn. The Median Renko wicks enable us to do this.

Fractal breakout trades are good (see post 10) but I think we can get improve on those. Stay tuned.

Looking forward to it.

Well the Renko bar drought that occurs every weekend is over. I was busy working on a set of rings for a couple getting married on New Years Eve, so I was not looking at the EURUSD.

Let's see what is happening with the De Mark Tend Lines (DMTL).



If you are familiar with DMTL they are drawn from the most recent fractal (usually) or De Mark point to the previous one.

Set "Show Arrows" to "True and the little circles (mostly at fractals) will appear on your chart.

An upper line is drawn to the first previous one that is higher.
A lower line is drawn to the first previous one that is lower.

On the chart we can see that the previous lower fractal was quite some distance back. This occurs in a down trend. The upper line finds a previous higher fractal a lot closer. A subtle clue about trend direction to be aware of. How far away does the DMTL indicator have to look to find the previous qualifying fractal?

I am going to get a little lazy her and call all the points that the DMTL uses to construct trend lines fractals, even though some of them are not fractals. I will also leave the MT4 Fractals off the chart so that it does not become cluttered.

Now, I am going back to work on those rings and will check in later.