long term position trading -primarily etf's-
- Thread starter sowterdad
- Start date
Hi Swift-
Yes, you are correct in your math as to why a new brick has not formed.
I'm going to attach an example of Renko in this post-
You can find the specific time frame, the ATR period (this is the # of periods in the past that are used to determine the Average True Range-- It is important to understand that the average true range -ATR value will get larger as one goes from a faster time frame- minutes- to a slower time frame- weekly.
Once the chart has determined the ATR average brick value- and posts it on the chart-
The value of the brick value will not necessarily reflect the actual price of the stock.
A new higher or lower brick will not form until the ATR value exceeds the existing brick top value or bottom value by the ATR amount. Essentially, price can fluctuate above or below
- almost 3 ATR values- 1 value above the brick, 1 value within the existing brick, and 1 value below the existing brick. Only when the value is exceeded will a new brick show- IF one is using the HI-LO_ setting.
If one uses the CLOSE setting, a new brick is only formed if the value is exceeded at the Close of the market- Price could drop 3 ATR values intraday, but if it recovered to close higher and less than 1 brick lower, nothing would show on the chart-
Renko charts do not form daily- unless the price action exceeds the ATR value of the existing brick. Days- weeks- even months could go by depending on the time frame one selects and if price stays within the ATR range- and no brick will form.
Most EOD Traders would itch to see what price did during the course of the day - or the week- and would likely find the Renko chart simply too smooth,;
My suggestion there would be to employ a Renko on a faster time frame- with a hi-lo setting if one just enjoys volatility- or a faster time frame with a Close setting- to ignore what may have been intraday volatility swings that may not have any merit.- But hard to ignore if one is looking at price charts daily.
I think Renko charts may be well suited for someone desiring to stay longer in a position- That should be a goal of all of us EOD traders-
A lower red box within an uptrend is likely a normal and healthy pullback in a consolidation-
However, once a swing low and higher move has been made, one should expect that swing low - and 1 ATR value below it- should not be exceeded if the trend higher is to continue.
The trader reading this may want to consider bringing up a Renko chart and comparing it to the typical bar chart and see how the two compare.
I haven't tried to employ Renko charts as my primary trading focus- Old habits are hard to change But what they do bring is an understanding of what the ATR and 'normal' volatility may bring- and most of us are not expecting that swing to be as large as it is..
As one drops down into faster time frames, the Renko brick values become smaller- and it more reflects the intraday price movements. I'll try to illustrate this later- this weekend.
Thanks for your interest- I haven't forgotten Volume -
Spouse says we're going to watch the new House of Cards this pm! No more time for
Chart stuff this pm!
Hope this chart helps to explain Renko-
You are welcome Cmoss- I wish I had a more developed and finite approach to share-It's an ongoing process-destination unknown.....but if you can find something that is of interest from
some of my ramblings, that is excellent and I hope it benefits you in the long run! I hope to occasionally challenge the status quo in both myself and those that might read something here.
I would also like to explore Renko more, and please feel free to share your experience in it's application, perhaps how it works for you - Close- or hi-lo? Do you use both a faster and slower time frame? Does Renko help in staying in focus and less reactive? Has that also kept you in trades for a larger gain? I will have numerous questions if you wouldn't mind sharing.
Although I do not day trade presently- I have followed a few of the threads here on ET when I have the time- and I have been positively influenced in my present thinking and trading by those initiates and the commentary from the more experienced traders hoping to assist, and willing to share their experience with others.
Please jump in any time and share or also be constructively critical!
Thanks to you for posting.
SD
Working this Saturday, but have some free time-and internet access!
Following up on chart sites that show Volume- I found that
http://bigcharts.marketwatch.com/ has a feature that- Interactive charts- click on standard volume box- cursor over chart- and volume is displayed along with price and date-
another site that I have known about for some time but have't gotten around to using much- but it offers a lot in free charting- with a short real time delay of 5 minutes.
http://finviz.com/help/elite.ashx#ta this is the help page- click on 'HOME' find a place to register- I may have to compare and determine if my decade long stockcharts account is worth the $25.00 or so I pay monthly for delayed quotes. I honestly don't make full use of stockcharts' features.
Following up on chart sites that show Volume- I found that
http://bigcharts.marketwatch.com/ has a feature that- Interactive charts- click on standard volume box- cursor over chart- and volume is displayed along with price and date-
another site that I have known about for some time but have't gotten around to using much- but it offers a lot in free charting- with a short real time delay of 5 minutes.
http://finviz.com/help/elite.ashx#ta this is the help page- click on 'HOME' find a place to register- I may have to compare and determine if my decade long stockcharts account is worth the $25.00 or so I pay monthly for delayed quotes. I honestly don't make full use of stockcharts' features.
I just cancelled my Stockwatch sub after not using it regularly for months. Only $20 a month but waste is waste.
looking at a Renko chart of TLT- I was surprised at how much time could be squeezed onto the chart and still have it legible.
I took the opportunity to include volume on the renko chart over the extended period (18 months +/-) and just illustrated the larger sell volumes.
The larger sell volumes on the right side of the screen seemed to largely indicate selling exhaustion, as they were followed by moves higher - however, on the left half of the screen,
higher volumes did not necessarily precede a rally reversal higher-
I know- I'm not taking this in "context" of analyzing what came prior-
I'm not here to argue the merits of what anyone wants to use to assist them in their trading.
If including a certain volume level as a qualifier to take a trade- or not- and it has given one a better win-loss or profit ratio- certainly continue to employ whatever may be beneficial-
Just don't accept that because some trading GURU/website makes a proclamation that such and such is a Buy on Big Volume, that it will always come true. If one waits for the big upmove breakout to occur on high volume, the entire Herd is in the trade on that day-
If you waited to enter to see how the day ended with volume- The buyers of that day will be selling you your shares higher at a profit as you hesitated until you think it was all clear to enter. Could the trade go much higher- ? Certainly- and I'm not against getting into an uptrending trade because it already had a large initial move-only because I hope the trend will develop legs-and go much further.
Volume - taken in context of looking at what price did on that day specifically-
may be more appropriate as a good indicator of an exhaustion move at a top or a bottom-
You can also see that longer stretch within the bar or the candlestick though- without having to be clued in what that stretched bar signifies -
High volume moves- both to the upside or the downside- shooting higher with a low close-
shooting down with a tighter close- both indicate that sentiment in the initial direction was high but changed over the course of the day- Or- a big seller or buyer stepped in....
In that regard, one may consider being positioned to take advantage of the trade in the other direction. A buy-stop order- might be appropriate to get a fill on what was an exhaustion move.
I'm now a more skeptical -limited- TA advocate than I was years ago. I spent a lot of time
with a lot of stuff under the chart- hoping to get it just so.
It's easy to get indicator reliant-and more difficult to reduce or minimize it- It's my friend Stan Stochastic that is looking over the shoulder and saying- "YUP, this looks like a good entry" , and when I look across the table to Ralph RSI- he is almost willing to proclaim - "It's oversold SD- Buy it!" But my buddy MAC-D McDonald is not quite so sure.
I just wish we could all agree and go have a beer to celebrate !
Are indicators of value in your trading? HOW many are really necessary?
Try the exercise by covering up the indicators on your screen and scroll through charts just looking at a faster chart and a slower chart- For Swing traders- perhaps that's the Daily and the Weekly. Pick a period where price is uptrending- Put in a single Fast moving average- Try the 5 ema just by itself (specifc EMA does not matter-just is a reference point) similar to a moving trend line.
What happens when price is moving away from the 5 and then starts to return closer to it?
It tells us that the momentum is slowing. If price drops quickly to the 5, the indicator will reflect the drop only after the price move has occurred. If price drops below the 5 and heads lower, the indicator will then belatedly follow.
Indicators have "overbought" and "oversold" levels-You cannot take that literally- Because something is in overbought territory does not mean it is about to sell-off-or that you should not be considering a 'buy' - Things can remain overbought for extended periods and $$$$ gains.
Same thing with "oversold" Something can be ' oversold' and still continue to go
much lower.
This terminology alone tends to make the value buyer think they're getting a bargain-because somebody stuck up the 'oversold' sale sign.
Do indicators have value? I'm sure some people can employ them successfully in their style of trading. Indicator use is/should be- secondary; should not come at the cost of viewing price & trend 1st- doing the analysis available there. Indicators should confirm what your price analysis suggests.
Divergences- Indicators can and do give different information than what price is doing.
Divergences can give a look at what is driving a move, and perhaps underscore the idea that the underlying momentum is slowing- although price is still increasing.
Got a bit off tangent- I intended
to focus on volume and got long winded ....
same chart-same time period-Renko & 2 hr
I took the opportunity to include volume on the renko chart over the extended period (18 months +/-) and just illustrated the larger sell volumes.
The larger sell volumes on the right side of the screen seemed to largely indicate selling exhaustion, as they were followed by moves higher - however, on the left half of the screen,
higher volumes did not necessarily precede a rally reversal higher-
I know- I'm not taking this in "context" of analyzing what came prior-
I'm not here to argue the merits of what anyone wants to use to assist them in their trading.
If including a certain volume level as a qualifier to take a trade- or not- and it has given one a better win-loss or profit ratio- certainly continue to employ whatever may be beneficial-
Just don't accept that because some trading GURU/website makes a proclamation that such and such is a Buy on Big Volume, that it will always come true. If one waits for the big upmove breakout to occur on high volume, the entire Herd is in the trade on that day-
If you waited to enter to see how the day ended with volume- The buyers of that day will be selling you your shares higher at a profit as you hesitated until you think it was all clear to enter. Could the trade go much higher- ? Certainly- and I'm not against getting into an uptrending trade because it already had a large initial move-only because I hope the trend will develop legs-and go much further.
Volume - taken in context of looking at what price did on that day specifically-
may be more appropriate as a good indicator of an exhaustion move at a top or a bottom-
You can also see that longer stretch within the bar or the candlestick though- without having to be clued in what that stretched bar signifies -
High volume moves- both to the upside or the downside- shooting higher with a low close-
shooting down with a tighter close- both indicate that sentiment in the initial direction was high but changed over the course of the day- Or- a big seller or buyer stepped in....
In that regard, one may consider being positioned to take advantage of the trade in the other direction. A buy-stop order- might be appropriate to get a fill on what was an exhaustion move.
I'm now a more skeptical -limited- TA advocate than I was years ago. I spent a lot of time
with a lot of stuff under the chart- hoping to get it just so.
It's easy to get indicator reliant-and more difficult to reduce or minimize it- It's my friend Stan Stochastic that is looking over the shoulder and saying- "YUP, this looks like a good entry" , and when I look across the table to Ralph RSI- he is almost willing to proclaim - "It's oversold SD- Buy it!" But my buddy MAC-D McDonald is not quite so sure.
I just wish we could all agree and go have a beer to celebrate !
Are indicators of value in your trading? HOW many are really necessary?
Try the exercise by covering up the indicators on your screen and scroll through charts just looking at a faster chart and a slower chart- For Swing traders- perhaps that's the Daily and the Weekly. Pick a period where price is uptrending- Put in a single Fast moving average- Try the 5 ema just by itself (specifc EMA does not matter-just is a reference point) similar to a moving trend line.
What happens when price is moving away from the 5 and then starts to return closer to it?
It tells us that the momentum is slowing. If price drops quickly to the 5, the indicator will reflect the drop only after the price move has occurred. If price drops below the 5 and heads lower, the indicator will then belatedly follow.
Indicators have "overbought" and "oversold" levels-You cannot take that literally- Because something is in overbought territory does not mean it is about to sell-off-or that you should not be considering a 'buy' - Things can remain overbought for extended periods and $$$$ gains.
Same thing with "oversold" Something can be ' oversold' and still continue to go
much lower.
This terminology alone tends to make the value buyer think they're getting a bargain-because somebody stuck up the 'oversold' sale sign.
Do indicators have value? I'm sure some people can employ them successfully in their style of trading. Indicator use is/should be- secondary; should not come at the cost of viewing price & trend 1st- doing the analysis available there. Indicators should confirm what your price analysis suggests.
Divergences- Indicators can and do give different information than what price is doing.
Divergences can give a look at what is driving a move, and perhaps underscore the idea that the underlying momentum is slowing- although price is still increasing.
Got a bit off tangent- I intended
same chart-same time period-Renko & 2 hr
Hi Just-
Agree- if you don't get to make use of something, and are paying for it - it's a waste.
I make limited use of stockcharts, within the time available- Other sites may offer just as much- for less. What do you now use for charting?
There's a lot available- commentary, screener, access to other chart lists that others post etc- but I don't take advantage of those aspects. I am so accustomed to those features I do make use of- like the horse returning to the barn- I haven't really looked closely elsewheres-
but wanted to share the couple of links for what looks to be a lot for Free.
I think FINVIZ allows a free registered user to have up to 40 chart lists-in his name-
I may get around to doing a comparison in the future-
Money is money- after all- A smart shopper wants value for what they pay for.
Have a good day! Thanks for posting!
SPY WEEKLY RENKO- 2013-15
WHAT IS INTERESTING IN THIS WEEKLY CHART-?
tHE WEEKLY BRICK HAS A VALUE OF $4.80
THIS IS THE atr OF 24.
WHEN I CHANGE THE ATR VALUE TO 6, THE VALUE INCREASES TO $5.15- AND THE BRICKS SHOWN CHANGE- October goes from 4 to only 2 bricks, November gets a brick etc.
There are things about Renko that I think one has to be cautious about over time.
If price has risen over time, and the ATR value is based on a higher price over the last # of look back periods, The ATR value brick size will be proportionately larger in relation to the earlier lower price- falsely giving the impression that that earlier price action was perhaps smoother than it actually was.
In other words- Spy present day value average say $200.00 with an ATR of $5.15 =2.5% movement within 1 brick- If we go back in time to the beginning of this chart in 2013-
Spy value was 155 - so the $5.15 value would allow for a 3.3% move during that lower priced period. This is something to be aware of in using RENKO- Conversely, If you make a purchase today and are using today's ATR value as a multiple for a stop-loss - and price goes higher, That ATR value or volatility means that you no longer have a 2.5% stop- against the higher price- Your stop-value % declines as price increases & moves further away from your entry.
I think I am correct in thinking about it this way-
So , Longer term Renko Charts in extended trends will be based on the initial ATR value and applied to the entire chart- So, Backtesting this approach may not give accurate information as to how successful the renko method appears.
One would perhaps have to consider either backtesting in smaller price blocks in a trending chart to get an accurate undistorted picture. also input a different value for the ATR look back- instead of 14 periods- perhaps try 7, 40, 100 etc.
If one is aware of this aspect, Renko charts may be ideal in reducing knee jerk reactions if one has a volatile position-
I'd like to continue to explore RENKO in faster time frames, and perhaps toy around with the add of an indicator to the mix- . YES- sacrilege! Well, experimenting a bit.
WHAT IS INTERESTING IN THIS WEEKLY CHART-?
tHE WEEKLY BRICK HAS A VALUE OF $4.80
THIS IS THE atr OF 24.
WHEN I CHANGE THE ATR VALUE TO 6, THE VALUE INCREASES TO $5.15- AND THE BRICKS SHOWN CHANGE- October goes from 4 to only 2 bricks, November gets a brick etc.
There are things about Renko that I think one has to be cautious about over time.
If price has risen over time, and the ATR value is based on a higher price over the last # of look back periods, The ATR value brick size will be proportionately larger in relation to the earlier lower price- falsely giving the impression that that earlier price action was perhaps smoother than it actually was.
In other words- Spy present day value average say $200.00 with an ATR of $5.15 =2.5% movement within 1 brick- If we go back in time to the beginning of this chart in 2013-
Spy value was 155 - so the $5.15 value would allow for a 3.3% move during that lower priced period. This is something to be aware of in using RENKO- Conversely, If you make a purchase today and are using today's ATR value as a multiple for a stop-loss - and price goes higher, That ATR value or volatility means that you no longer have a 2.5% stop- against the higher price- Your stop-value % declines as price increases & moves further away from your entry.
I think I am correct in thinking about it this way-
So , Longer term Renko Charts in extended trends will be based on the initial ATR value and applied to the entire chart- So, Backtesting this approach may not give accurate information as to how successful the renko method appears.
One would perhaps have to consider either backtesting in smaller price blocks in a trending chart to get an accurate undistorted picture. also input a different value for the ATR look back- instead of 14 periods- perhaps try 7, 40, 100 etc.
If one is aware of this aspect, Renko charts may be ideal in reducing knee jerk reactions if one has a volatile position-
I'd like to continue to explore RENKO in faster time frames, and perhaps toy around with the add of an indicator to the mix- . YES- sacrilege! Well, experimenting a bit.