Animal Farm (Renko system)

Yesterday I didn't trade as I wanted to see how the AUD/USD reacted after the weekend (and my own lack of confidence). It opened with no gap and continued to move down with a few possible signals. One of the 50% fib and two trend line breaks with AO on the down side giving confirmation. All ended at the 61.8% Fib level. Nice.

Well this morning was another sit aside morning. Monetary policy minutes came out so not sure what to do. There was a BW fractal which I spotted in hindsight, if taken it went to the 61.85 extension.

The only other way to have handled to-days mess would be to reduce the Renko brick size. That would have given me some nice trades.
Hohum. Thinking.

Update to post 402. Patience was all that was needed. Gave a wonderful sell signal just before Frankfurt opened. Pullback to the 38.2 and lovely extension to 61.8. Then second pullback to the 23.6 which extended to the 100% level.
Its amazing how pulling the fib to the first confirmed LL after a HH works. Should rename it as "The Controlling Fib" because it does until the trend changes.

Thanks for those great charts Batavier. It is most gratifying to see someone else use an idea that you have worked with and also use it well.

I am working on testing an ea that will really help with figure four entries and I hope to post it here as soon as I am happy with it.

Keep up the good work.

Wab

Today I feel confused. My bigger block size chart says possible up sequence AO on up side. My smaller block size says possible down sequence AO on down side. Don't feel like the planets are aligned today.

At a glance, I would say that your M2 and M3 chart are in a wave two. Draw the master Fib on the M3 chart from the last LL to the HH. then draw it on the same extremes on the M2 chart from the lowest LL to the last HH. That wave has five internal waves and that makes me think it is an impulse, likely a wave one. So, I think that you are now in a wave two ABC pattern, with A and B done and C underway. Wave two should usually correct back to the 61.8 to 76% area. When it gets down to that area, or gives a solid reversal pattern, or both, then think of longs again. AO should also show a bullish divergence. It may not go as deep as that, so also watch 50%. We don't know how far it will drop until it reverses but the Fib levels give us possible reversal levels.

If this is the first pullback on the M3 then look for a big up move coming up. Wave three or C. Check that M3 master Fib for targets.

Trading inside a correction is always tough going - especially in a wave four.

I have been fine-tuning some stuff and will start to post it in a day or two. I think that you will probably enjoy being able to fire off a trade manager to handle a lot of the entries. So, I am going to hold off on the one minute stuff for a bit until I am happier with my explanation of it. My focus is simplicity and that is difficult enough to achieve.

Some homework: Go to YouTube and watch this video:

If anyone is fluent in Russian, feel free to jump in. This ea is something that we may use, but I am unsure about its status. Is it free to download, or is it commercial? I have another ea to do the same thing but this is a really neat product and much less complex than the alternative. If anyone can determine its status please advise. I don't want to high jack anyone's work and deny them any credit due. If it is free to use you are going to love it.

Thanks for your advice re reading the charts. The market had other ideas though. Big down move. I was stopped out. Plenty more trades to come.

Trailing pending stop order sounds great.
That way you can get in early at each swing!! Love the idea.
However I checked afterburner on myfxbook. Seems that method has some big drawdowns - like 40%??

Not russian - polish. And no download on the site. Asked owner of the site and waiting.

Wow. Thanks Krystyn, you are a Godsend. I hope we can use that ea. I have another that will do the same thing, but it is far more complex.
I used it overnight with great results. Charts to follow.

Hi all
Perhaps this ea helps too.
Test your needs.

Thanks Kofix11 for that ea. I will test it asap. We are developing a real community of helpful people here. Nice.

Now, as promised, some material on how things work and how to take advantage of it. First of all market structure - as always.



The first chart shows a typical HH HL LL LH sequence with some trend reversals.



The second chart shows the same structure with the bricks that are responsible for it.

Now, we add the (red) E lines to the first chart.



Add finally the (red) E lines on the brick chart.



This is an explanation of why we look at a color change in the brick pattern as a trend reversal pattern.
It is a bit of overkill perhaps, but if you look inside every color change reversal pattern it shows you that
there is a trend reversal occurring. You can change to a LBF to find the details of the trend reversal and
that is why I use the two brick frames (30 and 10) for analysis.

Now how do we take advantage of it?

When we try for an entry on a figure four, the default is the 50% level of the oblique line.

Calcu asked a question about the entry on short retraces and that made me want to explain how
to handle the Figure Four entries, rather than just waiting for them. (If you have waited for a few
then you will be ready for this.) I did not want to add too much, too fast, as it all takes time to
digest.

I don't like sitting around waiting for things to happen, so this is a strategy to avoid that.

First, make sure from the HH HL LL LH analysis that you know which way the trend is going. I will use a bullish trend
for my example.

The master Fib (Batavier gets the credit for its name.) has been established and therefore we are going to trade a Figure Four
off of a bearish counter trend. Our counter trend starts with a brick that has a large upwards wick and a change of color -
green to red in this case. Momentum is above the red line and a retrace of price is imminent. AC is red and AO should
follow it into a down turn. Price has surged up and through the 200 Fib level so all the stars are aligning.

I placed a buy stop just above the top of the wick. I don't really want to buy there though. I want to buy as close to the next
bullish reversal pattern as I can. So I need something to move my buy stop down as the counter trend reversal moves down.

Now a reversal in a ten pip brick chart (to my way of thinking) is two bricks and a pip - 210 points. So I set my trailing buy stop
to be triggered by a 210 point rally in price.



The ea (the one that we hope to be able to use) begins to move the buy stop down keeping it 210 points above the extreme of
the lowest brick.



The trailing buy stop is triggered 210 points above the extreme low of the last bearish candle. You can see how the ea moved the
price down and down (arrow by arrow) to achieve this. The 161.8 fib level also shows its influence here. Always watch the Fibs.

A red, dotted, trailing stop level, set to trail 210 points behind the highest part of the bullish brick is also shown. (more on that later.)

So how does it all end?

I took a counter trend trade starting at a wick that suggests a drop back towards the red line. I used an ea to move a buy stop down
tick by tick until it was triggered buy a reversal of 210 points. I then trailed a 210 point trailing stop and ... I went to bed.

I awoke at 5:00 a.m. (my time) to take a screen shot and went back to sleep. (Drink lots of water before you go to sleep and you are
guaranteed an early morning check on the charts.)



It all worked while I slept. 70.5 pips.

Here is the Figure Four on this trade.




A 50% entry may also leave a good portion of the available trade unused on a deep retrace and this helps
with that too. IN this example we entered pretty much on the 50% oblique level. An entry on a long retrace
adds valuable pips that our standard 50% entry misses.


Some thoughts:

Our system is getting a bit more complex, but it is still HH HL LL LH in all respects - I will add a few helpers and
some trade assistants to help manage what we should now understand about market structure.

Do I always get these correct? No. But the casino doesn't always win either and they make money steadily.
I believe this system gives us an edge. Practice helps a lot. Screen time and persistence adds up. Then
there is the trailing stop and that purple line that you may have noticed on the charts. We will get to those
in due course.

Money management and automation strategies are ahead. The trailing buy stop and the trailing stop loss
can be dealt with in a variety of ways. Each requires explanations and time to fit it into the big picture.

I hope that the draw down question on the trailing buy stop was also answered.

I will check sleeptight and see if it is suitable for this sort of trade and I invite you to test it as well and report
back to the group. Many hands make light work.

I will also ask for any good trailing stop eas that people may have that are free. Specifically one that we can
set the distance to 210 points. I use LOC but it is not free and I will not/cannot share it. I have another but
it requires testing.

Meanwhile I will wait and see what Krystyn finds out about TPSO and if I can share it and we can all use it.

Lots to think about on these last two posts. Have fun.

1. For those of you who spend long hours staring at screens, I've found this template to be easiest on my eyes. !! AA Animal Farm Eyesaver Basic.tpl

1. I also use the #4X 3 semafor alert.ex4 a lot as it helps me to see the important fractals quickly. (Not 100% you still need to look carefully at all price structure.) You could even trade just using the semafor - wait for a sunrise or sunset then trade the next fractal in that direction (white = up red = down). Anchor your master fib to the sun and the first semafor fractal and look at the beautiful extensions. The semafor is just based on the old zigzag of three differing sizes (so like the zigzag it will keep on moving with price - just as it should, it's not a crystal ball!) Renko charts of course - I use the mean Renko.

1. Also included an old PDF :" the Amazing Magic of Now" very much in line with Wabs post 413 and understanding the fractal nature of the market.

Blessings to all. Bat

I am not up to much posting tonight. We had a lightning storm that blew up a power pole and put us in the dark for five hours.

I had a nice trade running and my connection to that broker is still not working. Fortunately, my stops were in place and a profit
was locked in.

Trades are like buses - another one will come along soon enough.

I will try to answer questions about LOC tomorrow. It is a great tool but can be tricky to set up.

No feed back from the Polish programmer of TPSO and I haven't had time to look at sleeptight yet.

Thanks to Batavier for posting his template and Semaphore. I puzzled over the Amazing Magic
material a while back and eventually developed my own understanding of structure as shared here.
I do believe that if you look enough and keep an open mind, you will find what you are looking for.

I have heard that build 851 is problematic. More information here if you have upgraded to it and
need to deal with it: http://ovo.cz/avoid-mt4-build-851/

Here are some X bar back settings for LOC trailing.



Initial stop is set to 21. You can use a bigger one ... your choice.
Trailing stop is set to 2 bricks back plus a pip (basically 210 points on a ten pip brick chart.)
This setting works with any brick size. Renko is particularity good with an X bars trailing stop
because it allows us to have a nice predicable point at which to place the stop. A color reversal
in the bricks is confirmed precisely at two bars and a pip. Two bars and a pip back is an excellent
trailing stop.

Note: You have to click on the Trailing method options to see all the setting numbers. Set it to 4 for X bars.

I also use a different LOC version, one that allows me to take a partial profit after the price moves a
set number of pips.

LOC is a commercial product - so please don't ask me for a copy. Do a search and check it out. In my
opinion spending a few dollars to purchase an ea that ultimately helps you make money is good for you
and good for the people that spend hours and hours developing the ea.

Disclaimer: I am not an associate of LOC in any way, just a happy user of their products.

I didn't receive any answer from the programmer of TPSO but in the meantime found similar ea's here on FF:
http://www.forexfactory.com/showthread.php?t=468993 - very simple
and
http://www.forexfactory.com/showthread.php?t=405694 - simple but with mm

Wow. You rock Krystyn.

After I found TPSO (and it was big search involving Google Translator and much puzzling on my part.) I didn't look for any
other eas to do the same job. My research went in a different direction. I found another way to do the same thing.

I look forward to testing these and invite anyone on the thread to do so as well and let us know how they perform.

Big round of applause to Krystyn.

Let's have a look at some fours. All of which could be traded by using a trailing pending stop order.



As you examine the chart you will see that not all fours are equal. Every one of them will give you a
profit if taken at the flat level. Inverted fours, numbers 1 to 6 on this chart, all meet their reward target
level, or even more if a trailing stop is used. (Two bars a pip back.)

However the A,B,C,D fours are taken in a counter trend and only A and B make their reward target level.
C and D only meet the flat level - maybe a bit more on a trailing stop if you are lucky.

When we look at the relationship between the red and violet lines (Teeth on the Ten pip and Teeth on the
30 pip)we can see that as long as the lines diverge we are in an impulse wave. When they converge we
are in a corrective wave. Corrective waves are messy and overlap a lot. Hard to trade but not impossible,
as the A B C D fours show.

If you have studied Bill Williams' material, you will also know that when the AO heads back to the zero line
that shows a corrective wave is under way. In this chart I placed ellipses on the AO when it is showing an
impulse is under way.

When the red and violet lines are diverging, fours are strong trades. Witnessed by numbers 1 -6. They are
strong because they are in sync with the dominant HH HL LL LH count.