Discuss the rammifications of using RENKO bars to capture trend moves

1

1a2b3cppp

With perfect execution, the largest amount you could lose trading on a renko chart would be 2 * the box size, right?

Say you're using a 5 point box. A green box forms. Go long. Price immediately reverses, confirmation that trend was wrong and a red box appears. You exit. That's 10 points you've lost right?

edit - How come multiple renko boxes appear all with the same timestamp. Did price really move 20 points at exactly 10:30 (or whatever example)???
 
reducing the box size shows more boxes all with the same time stamp.

I guess i need to watch these develop in real time to see what's going on.
 
Quote from 1a2b3cppp:

With perfect execution, the largest amount you could lose trading on a renko chart would be 2 * the box size, right?
More...

In theory yes, but in reality its going to depend upon what time frame your chart is set for. Your charting program is only going to draw boxes based upon the point difference between the closing price of the previous time period and the current one. In other words, if you are using a 10 min. chart, the program will only draw boxes based upon the closing price differences between the 10 min. intervals. Prices may have spiked or dropped significantly during that 10 min. interval, but the closing prices may be close to each other, in which case your charting program is not going to draw boxes illustrating the highest highs or the lowest lows. In addition, its not going to draw those boxes until the 10 min. time frame has elapsed, regardless of how much the market has moved. So, it is possible to lose more than 2* the box size. The only way to have your charting program draw an accurate depiction of the market using Renko boxes is to use a very short time frame. Think of it like the shutter speed on a camera. The more frames per second, the more accurate the depiction of what transpired.
 
Quote from trendy:

In theory yes, but in reality its going to depend upon what time frame your chart is set for. Your charting program is only going to draw boxes based upon the point difference between the closing price of the previous time period and the current one. In other words, if you are using a 10 min. chart, the program will only draw boxes based upon the closing price differences between the 10 min. intervals. Prices may have spiked or dropped significantly during that 10 min. interval, but the closing prices may be close to each other, in which case your charting program is not going to draw boxes illustrating the highest highs or the lowest lows. In addition, its not going to draw those boxes until the 10 min. time frame has elapsed, regardless of how much the market has moved. So, it is possible to lose more than 2* the box size. The only way to have your charting program draw an accurate depiction of the market using Renko boxes is to use a very short time frame. Think of it like the shutter speed on a camera. The more frames per second, the more accurate the depiction of what transpired.
More...

That's interesting.

I was wondering why even when I kept the box size the same, changing the time interval of the chart affected how it looked.

I need to go play around with it more.
 
Quote from trendy:

...has moved. So, it is possible to lose more than 2* the box size. The only way to have your charting program draw an accurate depiction of the market using Renko boxes is to use a very short time frame. ....
More...
what he said.
 
Quote from 1a2b3cppp:

That's interesting.

I was wondering why even when I kept the box size the same, changing the time interval of the chart affected how it looked.

I need to go play around with it more.
More...

I got a PM from an ETer letting me know that QuoteTracker updates a Renko chart in real-time as soon as price has moved far enough to draw another box. Apparently, there is no time frame QT uses with Renko, which is the way it should be. I use Esignal, and as far as I know, there is no way to use a chart that is not time, volume, or tick oriented.
 
You must log in or register to reply here.
Back
Top