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New System Test: RENKO 7

  • #1
  • First Post: Edited Sep 9, 2016 1:51am Sep 7, 2016 3:45am | Edited Sep 9, 2016 1:51am
I am starting this thread for two reasons:

1) To document and test a new system.
2) To train myself to trade responsibly and effectively

After 10 years and 10,000 hours of study, my trading is still erratic, undisciplined, and quite frankly, psychotic. Obviously knowledge alone will never make one a great trader. I blow accounts faster than Hillary deletes classified emails. As Mark Douglas points out in his book "Trading in the Zone", I have personally refused to take responsibility for my losses. I over trade, revenge trade, marry trades, add to losing positions, fearfully end winning trades, and in general, engage is every type of destructive trading behavior one can imagine.

Renko charts have always appealed to me. In my opinion, renko simplifies price action, and at the very least is much easier on the eyes. However, I have just about gone off the deep end in trying to get the renko charts to function properly. The main issue seems to be that after awhile the bricks don't update. For now, I seem to have everything working well with Pepperstone.

This system may seem infantile to most traders, and that's a good thing, because that's exactly what I need. I need a system that is like changing an infant's diapers. When I see the poop (or smell it), I take action. I get the diaper. I put the diaper on, secure the straps, wash my hands, and I'm done with it. Trading should be the same. I see the set up, I take action and initiate the trade, set the SL's and TP's, wash my brain from the trade, and be done with it. Enough said.

NOTE: ANYONE is welcome to post here. All questions, comments, and/or constructive criticisms are welcome. Please be respectful. Anyone that would like to post a chart, please do. It would be nice if you used the same template but whatever floats your boat is fine.

I am looking for two set ups:

1)Double tops
2)Divergence (classic or hidden)

There are only two things on the charts:

1) Renko bricks - 7 pips each (no wicks)
2) RSI with period 9

Attached File(s)
File Type: mq4 renkolivecharts_pimped_v4_13.mq4   20 KB | 643 downloads

Attached File(s)
File Type: tpl RENKO7.tpl   1 KB | 519 downloads


This is a personal journey of accountability. I am trying to develop the mental framework to SEE IT, SET IT, and LET IT GO.

Thank you in advance for any contributions and best of trading to all.
Pride always comes before destruction.... -Proverbs 16:18
  • #2
  • Edited 6:12pm Sep 7, 2016 4:06am | Edited 6:12pm
Money management parameters:

Risk: 2%
SL: 28 pips (4 bricks)
TP1: 33 pips (a bit less than 5 bricks)
TP2: 49 (7 bricks)

Two equal sized positions will be opened (1% each). If TP1 is hit, then the SL for the second position will be moved to BE.

UPDATE 9/72016: The SL has been increased to 4 bricks or 28 pips. My original study was done with 10 pip bricks so the SL's I was looking at was 30 pips. I think 21 pips (3 bricks) is too small and in too many instances is wiped out from spikes or low liquidity moves.
Pride always comes before destruction.... -Proverbs 16:18
  • #3
  • Edited 6:32am Sep 7, 2016 4:25am | Edited 6:32am
THE DOUBLE TOP

Entry Rule: Once the second top has printed, we wait for one reversal confirmation brick to print, then enter both positions.

Here is the first trade taken (was one pip late in entering manually)

NOTE: This doesn't technically fit the definition of divergence but I always draw in the yellow lines just for a visual reference. Not necessary, but I generally think the double tops work better when the RSI is at the more extreme levels.

AUD/USD
Attached Image (click to enlarge)
Click to Enlarge Name: AU.png Size: 275 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #4
  • Sep 7, 2016 4:47am Sep 7, 2016 4:47am
Interesting and clean chart ...

Are you looking at a minimum retracement in between the double top ? And is the RSI position in the 0-100 scale (except the need of divergence) important ?
MT4/MT5 EAs/Indicators/Alerts coder
  • #5
  • Edited 5:30am Sep 7, 2016 5:00am | Edited 5:30am
CLASSIC DIVERGENCE

I didn't take either of these trades as I didn't see them, but they are a good illustration of classic divergence and they both satisfy the conditions of this system. I like to see the RSI at least at 70 but preferably at 80 for the classic divergence trades.

EUR/USD
Attached Image (click to enlarge)
Click to Enlarge Name: EUR.png Size: 37 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #6
  • Edited 5:35am Sep 7, 2016 5:12am | Edited 5:35am
Quoting FerruFx
Interesting and clean chart ... Are you looking at a minimum retracement in between the double top ? And is the RSI position in the 0-100 scale (except the need of divergence) important ?
Thank you for posting.

In answering your first question, If I understand you correctly, there really doesn't need to be a particular size to the retracement. I think up to 3 or 4 bricks would still be fine. On the other end of the spectrum, if you look at the chart on about Sept 2nd, there was a double bottom where the retracement was only one brick and yet the trade would have worked out, (hindsight of course). Also, the RSI wasn't quit to the 70 level yet. Having said that, from looking at 1000's of charts, there generally needs to be a fairly strong move previous to the double top being formed. It is an interesting question as 'time" has been eliminated from the equation by the very nature of renko. For instance, a double top on a 15 minute chart doesn't hold much weight compared to a double top on a daily chart.

Your second question if I understand. Yes, I think the more "divergence" (or angle on the yellow line), the better it will work.
Pride always comes before destruction.... -Proverbs 16:18
  • #7
  • Sep 7, 2016 5:46am Sep 7, 2016 5:46am
A good charts with several examples
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Pride always comes before destruction.... -Proverbs 16:18
  • #8
  • Sep 7, 2016 5:58am Sep 7, 2016 5:58am
hidden bearish divergence

Attached Image (click to enlarge)
Click to Enlarge Name: EURNZD.png Size: 31 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #9
  • Sep 7, 2016 6:23am Sep 7, 2016 6:23am
Quoting Expo33
{quote} Thank you for posting. In answering your first question, If I understand you correctly, there really doesn't need to be a particular size to the retracement. I think up to 3 or 4 bricks would still be fine. On the other end of the spectrum, if you look at the chart on about Sept 2nd, there was a double bottom where the retracement was only one brick and yet the trade would have worked out, (hindsight of course). Also, the RSI wasn't quit to the 70 level yet. Having said that, from looking at 1000's of charts, there generally needs to be...
Clear ... Thank you.
MT4/MT5 EAs/Indicators/Alerts coder
  • #10
  • Sep 7, 2016 7:06am Sep 7, 2016 7:06am
Hello Expo33,

I like your honesty here on thread and persistance to continue with forex after 10 years.Many traders would quite much earlier.
Your strategy will work at ranging markets but will kill your account or at least will have big DD periods when stronger trend are there.

For example, look at your EUR/NZD chart how much would you lose and how much divergences are there? This strategy won't work or you need more filters (like longer term brick size with chart 7).

Just to safe your time!

Regards!
Attached Image (click to enlarge)
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  • #11
  • Sep 7, 2016 7:10am Sep 7, 2016 7:10am
DOUBLE BOTTOM: TRADE TAKEN (manual entry 2 pips late)

Interesting side note: Leading up to the double bottom is some regular divergence, but I have noticed that only one brick retracements don't really work out that well especially when using only 7 pip bricks.

USD/CHF
Attached Image (click to enlarge)
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Pride always comes before destruction.... -Proverbs 16:18
  • #12
  • Sep 7, 2016 11:31pm Sep 7, 2016 11:31pm
double bottom trade taken
Attached Image (click to enlarge)
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Pride always comes before destruction.... -Proverbs 16:18
  • #13
  • Sep 9, 2016 1:10am Sep 9, 2016 1:10am
So far this experiment/test has been exactly what I needed. Even though only a demo account, sticking to the rules has been a refreshing experience.

The first day or so was a horror show with nearly every trade but one failing. However, instead of breaking the rules, moving SLs or adding to losing positions, I let the trades finish their path and succeed or fail. The draw down at worst point was 13%. I stuck to my plan and system and continued to enter trades that fit all of my system requirements (although, I must admit, my confidence in the system was feeling a bit shaky after such a bad start).

At the end of the day the system did what it was intended to do.
Pride always comes before destruction.... -Proverbs 16:18
  • #14
  • Edited 1:55am Sep 9, 2016 1:17am | Edited 1:55am
Quoting Zokynho
Hello Expo33, I like your honesty here on thread and persistance to continue with forex after 10 years.Many traders would quite much earlier. Your strategy will work at ranging markets but will kill your account or at least will have big DD periods when stronger trend are there. For example, look at your EUR/NZD chart how much would you lose and how much divergences are there? This strategy won't work or you need more filters (like longer term brick size with chart 7). Just to safe your time! Regards! {image}
Hello and thank you for posting. Sorry for the delay in responding, I just saw your post.

The trades you posted that would have been losers are not trades I would have taken because there wasn't any real retracement. The second one would not fit my requirements because of the little retracements between the divergent end points as you have drawn them. As you stated, using only 7 brick renko these little "glitches" really don't give the divergence true credibility.

Even though double tops and classic divergence are clearly contrarian in nature, my TPs are only 33 and 49 pips, so even in stronger trending markets, those aren't really too big. Of course, as in the trade you re-posted, I am always looking for hidden divergence to capitalize on a trending market.

Again, thanks for your input, it is very productive and inspires me to contemplate and consider any needed alterations. I am still weeding out certain set ups. As far as the draw down, at 2% a trade, 10 losing trades isn't catastrophic (honestly, picking 10 losers in a row with such small TPs would seem hard to do)

Cheers and good trading and weekend to you!
Pride always comes before destruction.... -Proverbs 16:18
  • #15
  • Sep 9, 2016 1:32am Sep 9, 2016 1:32am
Quoting Expo33
{quote} Hello and thank you for posting. Sorry for the delay in responding, I just saw your post. The trades you posted that would have been losers are not trades I would have taken because there wasn't any real retracement. As you stated, using only 7 brick renko these little "glitches" really don't give the divergence true credibility.
Hello Expo33,

So what would be real retracement in your eyes than? Look at your USD/CHF trade it also hasn't got any real retracement period.

Not trying to disprove you just trying to understand logic behind your entries.

Regards!
  • #16
  • Sep 9, 2016 1:39am Sep 9, 2016 1:39am
Quoting Zokynho
{quote} Hello Expo33, So what would be real retracement in your eyes than? Look at your USD/CHF trade it also hasn't got any real retracement period. Not trying to disprove you just trying to understand logic behind your entries. Regards!
Agree, and that USD/CHF set up should probably be scratched from the plan.

The double tops seem to behave a little different, although I have noticed that longer and stronger moves into double tops seem to have the most success. I have been considering only entering double top trades after 2 to 3 brick retracements and/or when the RSI is a bit more oversold or overbought. Again, still in the beta phase here trying to weed out certain trades.

Here is good example:

First double top on the chart, not a big move into it, barely 70 on RSI, only one brick retrace, and fail.
Second double top after very strong move, RSI well over bought, 2 brick retrace, and winner

Like any good trader, it comes down to patience and stalking the trade with the best possible set up.
Attached Image (click to enlarge)
Click to Enlarge Name: GB.png Size: 32 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #17
  • Sep 9, 2016 2:05am Sep 9, 2016 2:05am
Of course everyone is a hero in hindsight, but here is the dragon showing a good example of what we are looking for in divergence and double tops.

Fairly strong move into the classic bullish divergence, nearly 80 on RSI, good retracement between successive lows, and nice angles on our divergence lines in yellow.

And secondly, a strong move into a double top, well overbought, 90 on RSI, 2 brick retracement, extreme angles on divergence lines.
Attached Image (click to enlarge)
Click to Enlarge Name: DRAGON.png Size: 39 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #18
  • Sep 9, 2016 2:22am Sep 9, 2016 2:22am
Set ups that don't meet requirements:
Attached Image (click to enlarge)
Click to Enlarge Name: GC.png Size: 39 KB
Pride always comes before destruction.... -Proverbs 16:18
  • #19
  • Sep 9, 2016 3:04am Sep 9, 2016 3:04am
Quoting Expo33
Set ups that don't meet requirements: {image}
Hello Expo33,

To me it is very subjective,you need at least 1 more filter...but anyway wish you luck with thread.

Highest Regards!
  • #20
  • Edited 3:36am Sep 9, 2016 3:09am | Edited 3:36am
Quoting Zokynho
{quote} Hello Expo33, To me it is very subjective,you need at least 1 more filter...but anyway wish you luck with thread. Highest Regards!
Thank you.

Indeed, trying to weed out set ups that are too subjective. Still studying and looking for another piece to the puzzle.

As in my last trade, a UCAD fail. A good example of my over trading and trying to force a set up that didn't truly fit the requirements.

NOTE: I will be updating the original post as time permits to try and outline the exact requirements needed for each type of set up. For instance, the more I study the double tops, the more non-subjective attributes I see that all seem to be present with the winning trades.
Pride always comes before destruction.... -Proverbs 16:18
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