Animal Farm (Renko system)

Hi Rea. Maybe this will help a bit:

Start with a 30 pip chart, zoom out so that you have either a prominent high or low, then use the red line as a boundary. Connect each pair of bricks that have opposing wicks that are at extremes, as you cross over and back on the red line. Don't try to do any analysis, just relax and go from one extreme to the other as you cross the red line and join the opposing wicks

The first chart is the recent 30 pip bricks USDCHF.



Now change the chart to a 10 pip brick chart. The 30 pip waves will still be visible. Use a different color (I used purple) and repeat the exercise joining the extremes of the opposing wicks again.



I zoomed in a bit here to makes sure you can see it better.



You now have two degrees of waves to examine. There are even smaller waves inside of the purple ones, but don't worry about them at this point.

Once you have the larger waves (black) and the internal waves (purple) try your HH HL LL LH counts on each, bearing in mind that there is a black structure with an internal purple structure. Sometimes they will overlap and share a wave.

The internal structure can have an occasional zigzag type of reversal, that stops after a brief probe against the bigger trend and then continues in the direction of the larger structure. You will find that those throw you off but the bigger structure asserts itself and off it goes again

I hope that this exercise helps. Remember, draw the lines in relaxed frame of mind and only then try to figure out the sequence.
Most of us try to do it the other way around. When you are relaxed it becomes an art exercise and it reveals itself better
when you switch to the analytical side. People who are really left brained (strongly right handed) find this visual stuff difficult.

I hope that helps. It can be a bit like not seeing the forest for the trees.

Zoom out before you start, it is very important to get the big picture before you start.

Good luck.

Hi Wab,

Thank you for the explanation, I took the liberty of not quoting your post since it was long, I hope that's OK with you.

I'm attaching my two charts, one with 30 pips bricks and one with 10 pips bricks.
On the 10 chart, I have drawn in yellow what I think would be an only buy zones, in cyan, an only sell zone and in red, where I would have lost it. I'm also not entirely sure if the cyan ellipse wouldn't have been a killer for me.
I'm also not sure if we're heading for an up trend or if the current high on the 30 chart is a LH and we're headed towards a new LL.
Did I draw everything correctly?

Thank you very much for your help.

Hi Rea.
You are getting the hang of it. Your ellipses that are tilted up, from left to right, are showing the impulse waves
and the ones that are tilted to the down to the right, show the corrective waves. It gets confusing because you
will just about always find both kinds of waves on a smaller scale inside each ellipse.

Here is another look at the same chart:




Use the AO and the BW fractal (First fractal above the red line, or a subsequent one closer to the red line as shown.)

When the AO is above zero we expect impulse waves where it is green and corrective waves as it heads back to zero.
I placed vertical Aqua blue liens to emphasis the relationship between AO and the chart structure. Check the color
change on AO its divergences and the above or below zero status. A divergence that is weak is noted. AO tells you a
lot when you get familiar with it.

The BW fractal and or a HH confirmation, is where I would be ready to enter. Red up arrows show the price levels and
price confirms those later and takes you in on a pending order.

I also added dotted black vertical lines that show you where the price has moved back through the red line. If you are
still in a trade when this happens that is a heads up to exit.

You are making good progress. I suggest lots of chart practice and you will gain your unique awareness of this. Mostly
concentrate on one pair at first and you will get in tune with it.

Bill Williams says that we do not trade the market we trade our belief system, or our understanding of the market.

Hi Wab,

Thank you.
It is not getting clearer .
What I'm saying, is, that looking at the chart, I can identify the HH, LL, LH and HL quite easily, the problem is what to do next. Most of the time it's like "OK, this is a fractal, it's above the teeth,price breaks down to form another HL, and then it "should" break above the former fractal and verify it as a HH or continue down as a reversal", needless to say overly exited me places a pending order above the would be HH when price is nearing it, the price touches the pending order or actually go a bar or two, sometimes even several bars up and then.... yup, you guessed it. Comes crushing down and I'm getting stopped out, or dismiss my stop(s) only to find the trend has been reversed and my loss is bigger then expected, dealing with it as a new down trend only to discover it was a micro trend that swoops up again and me? Well, I'm like that dog you've mentioned earlier, only I didn't catch that car, it stopped and reversed on me.



As a side note, since you've mentioned it earlier, I was born right handed, at a certain time in my life I had to use my left arm more, then use both arms and am back at using my right arm more but not exclusively, so fun times R-Us

Thank you for explaining. Would you say I should treat the 30 pips fractal lines as trend lines and only trade in their direction? Does it mean the last trade, as it's being reversed, would be a loss? Why the 30 pips, then? why not bigger bars or use ATR (the pimped renko EA has this feature) to calculate the brick sizes?


Thank you again for all your help on this. It feels like it's within my grasp but still elusive.


[EDIT]
Wab, what happens when the 30 bricks have not yet settled in? Like now in AUDCHF, I mean, if I wait for a decisive move on the 30, I'll loose a lot of trade opportunities on the 10 bricks, no? I would have asked why not simply trade the 30 bricks but then I'll just be facing the "how to trade this current chart" problem just on a higher brick size *SIGH*

Today's market. Ideal for Demark trendline entries. Waiting for last one to play out expect it to enter area of the elipse.

KaChing!!. In the bank.

Hello again Rea.

I looked over the AUDCHF and the chart is indeed confusing. Let's see if we can unravel it a bit.

"Would you say I should treat the 30 pips fractal lines as trend lines and only trade in their direction? Does it mean the last trade, as it's being reversed, would be a loss? Why the 30 pips, then? why not bigger bars or use ATR?"

Questions: I use 30 and 10 to help me understand where I am in the big picture. These two brick frames have a good relationship as is evidenced by the ability to show the teeth line from one on to the other with Fibonacci numbers involved. I don't use ATR Renko Bricks and I am not familiar enough with them to say if they are good are bad.

Now let's look at the AUDCHF chart with 10 and 30 pip bricks. Maybe that will answer some more of the questions:



I did a quick count on the 30 and identified the last LH and its corresponding point on the 10 pip brick chart.
Marked as X - 30 and X - 10.

Now take a quick look at the down waves. Nice trending waves, with barely a fractal in them. Impulse waves.

As price rises back to challenge the last LH it is going against the trend and shows corrective behavior. Lots of opposing
wicks and fractals, It see saws back and forth over the teeth line. Corrective wave.

You can trade that if you only trade long (dominant trend) but it is a messy place to trade. There are some smaller impulse
waves in there but you always do better trading in sync with the larger dominant trend.

From X - 30 price has worked its way up to a new HH. So above that, I would now expect the trend to be a lot better for
long trades only. I placed a Boss Fib on that wave. (Have a look at Bat's last charts. He is nailing that concept.)

It is a lot easier to see these things in retrospect - any one can read the past accurately. However by identifying
the dominant trend and trying to follow that trend, results are much better. It keeps you out of the whips in the corrective waves.

Having said that, there are good strategies for trading in the corrective waves. They require trailing stops on the fractals. That
will come up as we move along with more content.

Don't give up. There is a lot here and it is difficult to grasp but you will get your "AHA" moments. The more frustration you feel now,
the bigger the "AHA" is going to be. I too am a left-hand right-hand type. At times I feel I almost have to go into a trance and relax
before I can see the structure clearly and I often lose it again as I try to get it onto the chart. It gets easier with practice.

Wabs method keeps on working. Nice for the Asian market I just modified what he taught to suit me. My rainbows give strong visual confirmation.
MACD does as well but I'm used to the rainbow chart.

Lovely chart Bat.

Hi Wab,

Thanks for taking the time to explain.
I'm still reading everything wrong, took a few educational trades and they reversed on me, and I mean, reversed *SIGH*
Everything looks so good up until I enter a trade, I should open a reverse signalling service, take the opposite trade then I do and win.

What am I missing still?


What's a Boss Fib?



Thanks again.

The first Fib on a reversal is the Fib that shows us how far the move will potentially go. When you change trend
for example from HH HL to LL LH, start at the final HH extend the fib to the first LL. The retrace to the first LH
is often at, or close to, a Fib level such as 0.618 The 1.618 extension is the likely target.

There are examples of Fibonacci placement on the thread. (post 352 and earlier.)

Thanks Wab,

How can I avoid entering such nasty trades? How could I have known that the trade would reverse like that?

Maybe I'm not asking the correct questions?

Could be just a chance of a reversal here I think. Looks like the end of wave 5 to me.

Well what can I say. I was wrong.

Wab told me to try and count the 123`s.
Would you like to take a guess who had counted wrong?


*LE SIGH*

Yes Reama they are tricky blighters! I'm taking the day off today, going to drive 4 hours out into the bush to my brothers house and have a birthday party with him and his mates. No forex, no stress, fresh air and good times.

New start next week. Sometimes I find if I'm out of sinc with the market just sin bin yourself for a day. It helps clear the head and those pips will still be there tomorrow!
Keep the pips positive.

Well, if I had to take a day off from trading every time I'm not in sync with the market, I would have had more time to invest in my "real" work ))))

Happy birthday to him and many a beer to you!

Yes, everyone have a good weekend.

I had a good week with family visiting. Don't forget the reasons why we do this.
When we good at it we can help many other people.



Some study material:

Dominant down trend at a glance - from the 30 pip bricks red line shown here in purple.
Figure four trades, short only when AO is below zero. Two E Lines which were also
BW fractals.

Nice chart with lots of opportunities.

Did I trade it? No, not much of it. I did get in on that last run up today. I did spend time
with my daughters. I seldom see the younger one since she went off to university. There
are always trades looming. Family time is more rare and more valuable by far.

Hi Wab,

Thank you.
How do you get the HBF red line to show on the LBF chart?

Your last paragraph.... it is a holiday season here, so I get to see my nieces and nephews quite a lot which only makes me miss them more so yes, family always come first.


Thank you, again.

HBF has to be 30 and LBF 10 for this to work: