Animal Farm (Renko system)

Lovely.

Hi Monocor.

I guess I find it necessary to explain simple concepts. Often when you try to explain why a simple thing works, that explanation makes it seem complex.
I no longer add fractals to my charts but I use them all the time and need to explain that. The wick/fractal relationship is interesting to understand but you can use it without understanding it.

The HH HL LL LH analysis is a good one to go through on any chart in my opinion. The place where a trend reversal will occur is always good knowledge to have and or operate from. Of course you don’t know if it will happen until it happens, but knowing where it could happen is very useful.

As I mentioned earlier, moving to a higher time frame or bigger block clears up a lot of confusion. I am using small blocks here to illustrate as the price action forms more quickly.

If you have several different trading systems that work they will all point to the same places where the trading opportunity happens. I believe that we all trade our understanding of that in many different ways and eventually find one that works for us.

Anyhow, we are all here to learn and become better traders, or we wouldn’t be here. And any and all input is valuable if it is meant to be that.

I am certainly not in the Sonic R league and can only aspire. Meantime, maybe there is an additional morsel of material, that I will offer, that is of use to others. I will be adding a lot of ideas here and you can pick or chose if any are of use to you.

Now, having said all that, what is next?

Let’s look at a trade using 8 pips blocks and discuss various ways to manage it.



First of all, I somewhat relied on the DMTL here to convince me to go short. There was no wick bar and two red bars needed to give me a fractal confirmation. Two red bars needed by most people who trade Renko, but I got in a bit earlier because the DMTL had adjusted. So I gained a little bit there and every bit helps.

Now, I am in a short trade and I have placed my stop just above the last up fractal.

Time to discuss trade management strategy.

I can sit and monitor the trade, or have some sort of trade manager do that for me. There are a variety of ways to do this.

On the right of my screen you will see a trailing stop program called LOC. It is a commercial product, so please do not ask me for a free copy.
Look for "Land of Cash" on Forex Factory and you can find out about LOC.

LOC has the ability to trail a stop in a variety of ways. On this chart I have it set to move the stop down when a new up fractal forms.

That way, if I get a good move with multiple waves LOC will lock in profits fractal by fractal, until we get a market reversal.

So I will let that one run and come back to it later.

There are many strategies for managing trades. Another I will use, is designed to just catch the red to green green to red moves in Renko.

You will not need a trade manager like LOC to do this if you can watch the trades yourself.

Here is another way to trail a stop. This time on a faster EURUSD 4 pip median Renko.

(I jumped in here on the DMTL arrow, wanting to show another stop trailing method.)



This time I am trailing the stop two bars back, plus a pip. I can do this manually, or let LOC do it for me.

You can see here that the stop has already been moved by LOC.



The stop will be moved down based on two bars back plus a pip - programmed into LOC.

Meanwhile, the AUDJPY 8 block Renko has not broken below the last LL fractal. So I can close the trade or let it form a higher fractal and move the stop down to that level when it does and see what happens.

Since we are giving LOC trailing fractals a test run I will stay with that strategy there. If I was using the two bar trail plus a pip as I am in the EURUSD, I would probably be getting stopped out around this point.

I have experimented with trailing stops a lot. There are many methods: trailing on a moving average, PSAR, ATR stops and so on. I use them when I cannot sit and watch a trade, which is most of the time. They all work to some extent, some better than others.

Sometimes I switch from one to the other, based on what the chart is doing. Sometimes I pick one and the other does better. I have not found a trailing stop method that works perfectly, X bars back (two bars plus a pip) or fractals stops in synch with the trend do well enough.

I have pips locked in on the EURUSD now and the jury is out on the AUDJPY.

I will update in a while.

I took the dog for a walk and the two bar plus a pip trail made a few dollars while I was out.
LOC is a very handy tool that monitors a trade when I can't.

Wab

You have been using LOC for a long time and it must have been of good value.. Today I saw that I had looked it up on another thread where you had spoken of it.

Your continued use of it tells me that you have used it with more than one system and had good luck with it.

I have a LOC trailing ea as well and like it very much. When I got it I only needed/wanted the MA trailing so I get the less expensive one (19.95). Been very happy with it but would like to get the one you're using WAD, with more functionality.

Appreciate the direction of the thread. Had a few questions. If I'm getting ahead just say so. Some were answered in your last post.
I've noticed you seem to use a few entries...WE, break of an LL or HH, DTML signal. Do you have a criteria for which one you'll use or does it just depend.

Also on the block size. Do you favor a particular size for your day to day trading. Seems like the smaller the block the more you'd be tied to your screen to catch the entries. Especially on WE entries. I guess on LL/HH breaks you would just set up a pending.

Yes Blaiserboy, I have been a LOC fan for some time. I also use it when I am trading Bill Williams methods with a trailing stop on one of the Alligator displaced moving averages.

Thanks for the support spyderman. If you are in the right place at the right time, the best right time being when you have established which way the trend is going, any and all of the entries are good. The WE gets you in closest to the action. A fractal confirmation is the two bar entry that most Renko traders seem to favor. A DMTL break and a fractal breakout are good for additional entries. All are price based and all good and useful.

To me, trading in the same direction as the trend is most important.

In my "time" based trading I prefer H1, H4 or daily charts. That way I do not have to check things very often. I can place pending orders and move stops occasionally.

As for block size, small blocks will do to illustrate and test the strategies. Bigger blocks are preferred but I have not established a favorite size yet. Maybe someone with more experience can add to that thought.

When you use bigger blocks the X bar stop will have to be modified a bit.

It looks like the AUDJPY 8 trade is about to form an up fractal. We have a wick entry as well. If it does form an up fractal, LOC will move the stop down to it as soon as it breaks below the last down fractal. That would also trigger a DTML signal to go short as the lower trend line would break. It all works together and a lot of it becomes surplus as we gain experience.

(I left the fractals turned on to illustrate them. LOC does not need to have them on the chart.)

A benefit of the small blocks is that the trader has to be sharp in order to get satisfactory exits and entries. This is good exercise for learning some concepts.

Here is how the AUDJPY trades worked out with fractal stops.

Hold that thought Blaiserboy.

There are mixed benefits to having smaller blocks. Think of adding on a trade at every new block.

I was at a friend's house tonight and we had a really nice 4 pip block run that started with a 5 pip risk and went to 30 plus pips in a few minutes. Adding on at each new block would have really upped the score there. What you end up with is an arithmetic progression and each new block rapidly gets to be worth a lot of pips while the risk is controlled nicely with an X bars trailing stop. At some point I hope a good programmer is interested in that.

I have written an Excel Spreadsheet that shows how the math of that works, but let's hold that thought back for a bit.

Too many things at once and we will just have total confusion.

How about some useful alert indicators next? A sound alert when a wick forms for example?

Coming up soon.

Where'd ya go WAB...

I wonder about the same...

Probably Wab is having to deal with severe weather at this time

No doubt...hope he's not snowed in with no power.

I'm in the South and its zero down here.

Here it is -24 C and the wind chill makes it -37 C and where he lives is often a lot colder...

The good news... by Friday temps will move up to freezing. hahahaha

sorry guys,here is about 100 degree,hot.

100 degrees in the US...where is that

.well,Im in brasil,that explain it to you,did you make money on the news ""usd-cad """ ??