Animal Farm (Renko system)

An up fractal forms and LOC moves the stop one pip above it, just as it is programmed to do.

Now will we get more downside action or ... will the trend reverse?



You only know after it happens.

However, the green wick alerts might be getting our attention.

And the run is ... stopped out.



LOC has stopped us out just above the place where a two bar reversal would have done the same thing.

I have added labels so that you can see where the best wick entry (WE) was. We had a HH, then a reversal as the price
broke the previous HL (red line) to make a LL. It then pulled back to make a HL and that was the Wick Entry I wish I was there for.

(That's what happens when you eat desert.)

Initial stop just above the HH then trail it down LH by LH (LOC will do that nicely.)

A nice trade, even though I got in late and got stopped out.

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I have added a MACD indicator to the bottom of the chart.

Like the Wick Alert the MACD is useful when we understand where we are in the HH HL LL LH sequence. When you know that,
and only then, the wick alerts and the MACD become extremely helpful.

Here are the settings for the MACD.



Note the MACD Alert has an alarm for when it crosses zero. I generally leave it off. You will see what I mean when it goes off... repeatedly.

Note:

When you open and close your MT4 the wick alert arrows and the MACD alert will get scrambled up on the Renko Chart.

Just open them, select edit, and close them to have them display properly.

A lot to digest here before I get into the MACD too much. It told me that I would get another chance to go short - but I was busy writing this.

(Should have had another desert.)

Then it tells me that we will get a messy long correction. But, I am getting ahead of myself again.

Such a nice teaching chart. Wouldn't you know it, the MACD telling us something, right on cue.



Note the bullish divergence on the 5 34 5 MACD.

As I explain this wonderful indicator more you will come to know that divergence very well and what it means.

(I expected a bit more of a down move after I was stopped out and I have a change in the stop strategy that
would have gained another 93 but let's wait until later to see how that works. It is using LOC in X bar mode.
Watch for that later.)

For now let's look at the MACD divergence. That divergence just about always occurs at the end of a strong run
just as a counter-trend, or a reversal arrives. This is where most traders lose their money. (The dreaded wave four
in Elliott Wave terms.) I expect the MACD to climb back to zero at least and to also create a triangle full of whipsaws.

In a Renko Chart this is somewhat smoothed but still a dangerous area to trade. A break of the De Mark Trend Line
that will form the bottom of a triangle will tell us when to go short again.

Having said all that, I did enter a long trade to demonstrate how LOC and Fractals work here. I don't expect to get
much, but sometimes the correction can go on for a long time and you can gain a little. Normally I don't trade these
corrections after a divergence. We may well see why, as this works out.

So, not much to do now. These corrections tend to be tedious. Let's see how LOC fractal trailing does with it. I will
likely be asleep as it works out.

Later.

Just a view of the Renko chart when the Wick Indicator arrows and MACD get messed up.



Just reset them to smarten them up.

Chart is back in shape and up a few pips.



I will leave LOC to move stops fractal by fractal.

I will not be awake for the London open, 1:00 a.m. my time, so that's it for now.

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Next, I will talk more about the MACD and its use.

Can we do this without the Wick Alert arrows? Yes.
Can we do it without the MACD? Yes.

They do make it easier, but only if we use them correctly. Knowing how to identify the trend is the most important thing.

Go back to the theoretical diagram in post 98 and make sure that it makes sense to you.

No matter what method of trading you eventually settle for, that is the most important thing to learn.

As expected, the counter-trend trade did not do well. It was stopped out by a fractal as the DMTL broke and signaled a short trade.



I added a black line to show where the DMTL was at the time. A break of that trend line was a good entry for the next down move.

Now, I would like to draw your attention to the relationship between the trends and the MACD.

When the MACD is below zero then it is best to only trade down moves (LH to LL) and be in synch with the LL LH sequence - until a reversal occurs. Then trade the up trend moves (HL to HH) when the MACD is above zero, and be in synch with the HH HL sequence.

The purpose of the DMTL, the Wick Alert Arrows and the MACD is to help with this.

In the next chart I will display the MACD trend status on the Renko candles.



The colors of the candles match the status of the MACD. Trend and counter trend above and below the zero of the MACD are now color coded right into the Renko Chart.

Here are the settings. ( I leave the MTF display off.)



So lots to play with. Have a look tinker with it and see what you think. I will try to get some more charts up this evening.

Hey Wab,

First i want to say thank you for all your effort and for sharing your experince with us and i have decided to learn your method as i am really frustrated with my self as i have been changing strategies and jumping around thread looking for the magical tactics and the holy grail and i don't need to tell you how that have ended but i am really optimistic with your strategy as it combine price action and simplicity and the real market flow so i will follow and hoping to finally find mu way in this f* market and make some profit .

I have read what you posted till now and been practicing on how to determine Trends as you said it's the essence of the markets and i have attached a chart of what i have been doing hoping that you will correct any wrongs or encourage me to keep going .

Wish you luck with your thread , Best regards .

Welcome Kmalex.

Your last LH on the top chart. should be one fractal to the right.
On the bottom chart there is a missing LH to the right of the last LH.

Remember that a new LH is only verified when price breaks below the last LL. (Vice verse with HH HL.)

It takes practice then it gets easier.

Thanks for posting charts.

Thank you for your reply and correction (just to be sure,if we have more than one fractal befor the break do we take the highest fractal or the last one to be our last HL the chart i have attached shows what iam asking about ) I will practice some more and get back to you with more charts .

BEST REGARDS

Yes, when you get a break below the last LL you select the highest fractal between the LL and the place where it breaks, as the LH.

This will be important when we start to use Fibonacci Ratios. In your chart above, you could have a pending order just below each LL
and let the market take you into a breakout trade there. You can also try for an entry at the LH in each case, using the wick entry.

The retrace level/wick entry is the best entry place.

I will put some info together on that and it will hopefully answer questions that have been asked already. Questions that I have not
got to yet.

WAB

Wanted to post this trade I took to see if I have the general idea.
I got in a little late, but there ya go.

Looks good spyderman.

If you are not on the screen all the time late trades happen, but if you know how
the structure is forming you can still collect some pips.

Now look for a WE at the anticipated LH. A break of the red DMTL will follow and a fractal
will also form one or two bars after the wick does.

The fractal stops are an easy way to trail a stop but we will do better with a a trailing stop X bars back.

I have to go to Calgary tomorrow and will be off line all day. When I am back I will talk more about a second
trailing stop strategy and some other things that will help locate the potential LH before it actually happens.

I would say that I am about two thirds into the method now. A bit more to add then we can
start to fine tune it.

Good job. I promise it will get a lot better as one thing builds on the next.

Trade +30 pips. Sorry I don't use MT4 for order placing, can't show it on the chart

I will try to place some trades. This week +93 pips. Two pairs EU and EJ. Trading time 12AM EST - 12PM EST. Renko 4 pips box size.
I am using hard stop 17 pips.

Hey,wab

I just wanted to clarify things out here with spyderman's chart the selected LL in the chart below haven't been broken and so we shouldn't mark that selected LH and therefore there will be no new HH until the break of the last(highest) HH so if that correct we can't take that entery so please correct me if i am wrong as i am still learning and these thing gets to my head , thanks.

Actually it did break the LL. By only 6/10 of a pip...but broke nonetheless.

I wouldn't consider it broken until candle close bellow

Have to see what WAB says. A LL is just that...a lower low. If it was a lower close then it would be LC...

Just closed a trade +23 pips.
Total for a week + 116