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Last Post: 2/28/2015 2:02:12 PM - Followers: 95 - Board type: Free - Posts Today: 0



Welcome to the Renko Chart Form in which Renko charts are used to determine the following about a security:

(a) Easy identification of support and resistance lines.
(b) Easy identification of continuation patterns such as triangles.
(c) Identification of reversal patterns such as head and shoulders, triple tops, double bottoms and other classically accepted reversal patterns.
(d) Discovery of trends and their reversals that cannot be "seen" on a PPS chart.
(e) Refine our abilities to daytrade/swing a chart as to build up our accounts.

Basic Information on Renko Charts

Renko charts predate the traditional PPS chart and were developed at least four centuries ago. Grounded in the "Renga", the Japanese word for "brick", Renko charts present a representation of the PPS movement not unlike a swing or three line break chart. Unlike swing and three line break charts, the OHLC format is replaced by "bricks" which indicate the "trend" while filtering out small variations from the trend. In classical Renko charts, not subject to tricks mentioned later, a brick is drawn in the direction of the prior move if and only if the securities price moves with a particular strength/magnitude; with a strength/magnitude indicated by the brick size. Only when the price moves at least one brick size will the Renko chart add a brick -- even if it takes several days to generate such a movement! Thus, Renko charts ignore time and track ONLY the movement of the price regardless of how long it takes to register a change of sufficient magnitude/brick size.

The construction of the chart is simple -- If prices move more than the Brick size above the top (or below the bottom) of the last brick on the chart, a new brick is added in the next chart column. Hollow bricks are added if prices are rising. Black bricks are added if prices are falling. Only one type of brick can be added per time period. Bricks are always with their corners touching and no more than one brick may occupy each chart column. (Note: Some people use this coloring scheme, but others use customs colors.) It's important to note that prices may exceed the top (or bottom) of the current brick. Again, new bricks are only added when prices completely "fill" the brick. For example, for a 5-point chart, if prices rise from 98 to 102, the hollow brick that goes from 95 to 100 is added to the chart BUT the hollow brick that goes from 100 to 105 is NOT DRAWN. The Renko chart will give the impression that prices stopped at 100.

Reading a Renko Chart

The MOST important information on the Renko chart is when bricks change colors; indicating a trend change has *just* occurred. Just as in a swing chart, the change in brick color indicates a trend has established and appears stable enough to trade. (People who make swing charts using OHLC know this behavior.) Although this seems and easy way to determine trades, one must choose whether or not a one brick change is sufficient. Some people accept one brick as an entry point, but others require the confirmation of a second brick as to avoid whiplash, remorse, and traps.

Curiously, if you're into TA, all the same rules of TA apply. Look for patterns, resistance/support lines, head and shoulders, channels, double bottoms, triple tops, and other signals. All the rules you learned for PPS charts apply -- even PSAR/SAR signals. Word of warning, Fib-lines are still up for debate, but the forum will test them out and try to figure a modified method. The trick is translate the Renko findings to a PPS chart and develop a personal trading system. In general one can assume:

(a) The resistance/support in a Renko corresponds to a resistance/support in the PPS chart. The number of times such a resistance/support is tested indicates its strength on the PPS chart.
(b) Reversal and continuation patterns in the Renko chart are a lagging signal for trading the PPS chart.
(c) Channels on Renko charts reflect channels in the PPS chart; even if the PPS chart is too ugly as to see the channel. Sometimes the Renko will imply the B. Bands as a channel.

Keep in mind that classical Renko charts show the history of the PPS -- they are not predictive. Soapy Bubbles will present a method in which to introduce errors into the Renko chart as to make them predictive in Amibroker.

Parameters at Stockcharts.com's Renko Chart

There are two ways to specify the Brick Size for a Renko chart: Absolute Points and Average True Range (ATR). In addition, you can specify whether closing prices or high/low prices are used.

Absolute Points

With the "Absolute Points" method, you specify the size of each brick on the chart in points. The advantage of this method is that it is very easy to understand and predict when new bricks will appear. The disadvantage is that the point value needs to be different for high priced stocks than for low priced stocks. Typically you will need to choose a value that is roughly 1/20th the average price of the stock during the time frame you want to chart. Common values include 1, 2, 4, and 10. Another way to select a value is to choose the average volatility in the PPS and use that as the point. For example, if a stock tends to swing 0.03 per day, try that as the point size. Sometimes you'll get better resolution on trend changes.

Average True Range (ATR)

The "Average True Range (ATR)" method uses the value of the ATR indicator to determine the brick size. The ATR indicator is designed to ignore the normal volatility of a stock and thus it can "automatically" find good brick sizes regardless of the value or volatility of the stock selected. ATR with a value of 14 is the default value for Renko charts and should generate a very usable chart in most cases. If you want to find the ATR on your own, keep in mind that the ATR is the greatest of the following:

(a) The distance from today's high to today's low.
(b) The distance from yesterday's close to today's high.
(c) The distance from yesterday's low to today's low.

Just find the values and choose the largest one. That's your ATR. There are fancy ways to manipulate the ATR and that will be described later.

High/Low Prices

When using High/Low prices, it's important to note that the rules for drawing Renko charts favor hollow bricks. In other words, regardless of the current direction of the bricks, you first check to see if any new hollow bricks can be added to a chart and, if they can, you then stop without looking at the lows of the day.

If you're using High/Low and points for your chart (which you should), the ATR(14) from SC.com will help you.

Long and Short Charts

When choosing the timeframe for the Renko chart, keep in mind the Renko chart ignores time. Thus a long and short term charts will perform the same. In addition, five minute Renko charts may be utilized for daytrading.

Renko Methodologies and Abuses to Help Traders

Mr. Bigz's (BI) Indicator Method



The BI indicator (a creation of Mr. Bigz) is a clever convolution of TRIX(3,3) and Renko Momentum displaying the triple exponentially smoothed moving average of a closing prices over a given time interval; whether it be daily or a matter of minutes. The elimination of whipsaws is established via EMA crossings and is explained in the above chart. As a system, the BI provides a complete trading system suitable for scanners and daytraders alike.

Soapy’s Predictive Error Method (PEM)

TBA

The One Block SWC System



Note: The sell signal should occur only if the STO is over 80 or 82. Anything below that isn't quite a real sell signal unless the stock is diluting or bad news becomes public.

The Two Block ADX System Requiring Confirmation



Note: It's nice to wait for confirmation, but sometimes you will miss out on some of the profit.

Soapy's CCI Method (Risky as Hell)



Note: I've burned myself with this method a few times and found it's a big board method. Nonetheless it does work on the OTCBB/PK for securities with healthy volume and a small short position. Also the CCI method may issue an early sell if the securtiy rides the upper B. Band for a long period of time. In that case, use the SWC method. Simplegreen notices that if you plot Slope(20) under the CCI(20)/CCI(2) signal, you can filter out false sell signals by sticking with the security when the Slope(20) is relatively high and stable (nearly horizontal line over 0). Even if the CCI(2) drops while the Slope(20) remains high, stay in. Once the CCI(2) and Slope(20) drop in unison, that's a truer sell signal. Another sell signal exists when %K crosses under %D on the Full STO since it seems to slightly lead the CCI sell signal.

DRAFT: Setting up the Standard Renko Chart (SRC)

The SRC has the following settings:

(a) One year timespan for daily charts. If you use a intraday chart, choose a timeframe that fills the chart nicely with data.
(b) Select ATR(14).
(c) The chart should have the CCI(20)/CCI(2) setup as discussed earlier in the iBOX.
(d) The chart should have the FULL STO for sell signals.
(e) Slope(20) or Slope(10) should be included as to filter out false sells on the CCI method.
(f) If it's a 1,5,10,15, or 60 min chart, include the RSI(2) for buy/sell signals.
(g) Some people like to use the Trix(3,3) and this is optional.

Educational Materials

EQUIS: Technical Analysis from A to Z
Author: Steven B. Achelis
RapidShare Link:
http://rapidshare.com/files/110945475/Technical_Analysis_From_A_To_Z__By_Steven_B_Achelis_.pdf.html

Stockcharts.com Reference on Renko

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:renko

Other Websites For Information

http://www.investopedia.com/terms/r/renkochart.asp
http://www.marketscreen.com/help/atoz/default.asp?hideHF=&Num=94
http://www.markettide.com/html/renko.html
http://www.weboma.com/renko-chart-how-to-trade-using-renko-charts/
http://www.day-trading-strategy.com/Renko.html
http://www.stator-afm.com/renko.html
http://www.traders.com/Documentation/FEEDbk_docs/Archive/082007/Abstracts_new/Duddella/duddella.html

Here is a great video explaining the Renko system!!

http://breakpointtrades.com/CamtasiaFiles/Renkosystem/Renkosystem.html

PostSubject
#2104  Sticky Note Hey soapy - can u put this in MrBigz 04/11/09 02:29:24 PM
#2122   To RENKO Stockchart users. byculla 02/28/15 02:02:12 PM
#2121   UAMM~start with this one. Good one to get Cloudbreak 01/15/15 11:04:07 AM
#2120   Simple, My Friend! charger 01/09/15 12:18:33 AM
#2119   I have started using the "pinch" for buy mbehr55 04/09/14 10:09:38 AM
#2118   Good way to set upchart: mudturtle 10/30/13 03:45:20 PM
#2117   I'm trying to learn Renko charts and use mbehr55 08/22/13 09:19:29 PM
#2116   SVM chart pinch: mudturtle 02/08/13 12:54:39 PM
#2115   CLD Renko pinch: mudturtle 02/08/13 12:43:49 PM
#2114   Thanks for the reply Renkoron I am a jwitko 11/24/09 12:43:11 AM
#2113   jwitko, I do not know of any backtesting renkoron 11/19/09 09:37:10 PM
#2112   Can anyone recommend how to run Renko chart jwitko 11/19/09 12:11:27 PM
#2111   Renkoron duke56468 10/18/09 12:25:27 PM
#2110   duke, Not much action here as you can renkoron 10/17/09 09:46:35 PM
#2109   Hi I'm new to this board and interested duke56468 10/17/09 03:03:40 PM
#2108   stockcharts.com/c-sc/sc?s=MNI&p=D&yr=1&mn=0&dy=0&i=t81793083355&m=o&r=993 reconranger 05/21/09 01:25:23 PM
#2107   I'm new but from all I've learned, yes, Dixie104 04/26/09 06:04:41 PM
#2106   Entering a Trade using the Renko system Dixie104 04/26/09 06:00:08 PM
#2105   Can any of you renko experts give me downriver 04/22/09 08:08:50 PM
#2104   Hey soapy - can u put this in MrBigz 04/11/09 02:29:24 PM
#2103   NHYT: DOLLARLAND 02/11/09 05:18:14 PM
#2102   The intraday model buy on FAZ yesterday turned JLS 02/10/09 01:22:38 PM
#2101   renkoron, JLS 02/09/09 04:52:44 PM
#2100   Hey Soapy, could you hook me up with stocksurgeon 02/06/09 11:13:51 AM
#2099   SGLS 15 min renko should have a joanneg 02/06/09 10:59:27 AM
#2098   FAZ~FAS-default settings,around 3%.Nevermind about these posts I'm just charger 02/01/09 10:50:20 PM
#2097   FAZ~FAS-.36%15min. charger 02/01/09 10:32:30 PM
#2096   FAZ~FAS-1.7%15min.-Posting these just so I can compare and watch. charger 02/01/09 10:23:50 PM
#2095   Yeah... there was a huge interest and then Soapy Bubbles 01/09/09 10:45:46 PM
#2094   JLS, looks like they are a little touchy renkoron 01/09/09 06:11:56 PM
#2093   M Green line will be tough. Signals thrown on circles. Soapy Bubbles 12/18/08 12:38:55 AM
#2091   Loose what money? JLS 12/17/08 03:21:33 PM
#2090   damn..you go thru a lot of trouble with MONGO 12/17/08 07:42:30 AM
#2089   fast_eddie, JLS 12/14/08 03:36:17 AM
#2088   fast_eddie, JLS 12/12/08 06:45:05 PM
#2087   JLS...I can write some pretty complex code in fast_eddie 12/12/08 08:12:58 AM
#2086   fast_eddie, you're right. I don't know what you've JLS 12/12/08 04:29:57 AM
#2085   Thanks I am in the same ballpark as yourself. PKPet 12/11/08 10:58:52 PM
#2084   never have a problem getting filled - it's MrBigz 12/11/08 10:50:22 PM
#2083   What is the size of your trades? With PKPet 12/11/08 10:43:46 PM
#2082   simplegreen would probably be the best to ask MrBigz 12/11/08 10:40:06 PM
#2081   I love playing the pennies, especially subpennies - MrBigz 12/11/08 10:37:51 PM
#2080   Mr. Bigz, now that I have your attention PKPet 12/11/08 10:28:41 PM
#2079   I want to thank you, Charger, and Renkoron PKPet 12/11/08 10:17:48 PM
#2078   Hey Peter. MrBigz 12/10/08 09:49:02 PM
#2077   JLS...we seemed to have gotten off track a fast_eddie 12/10/08 04:25:45 PM
#2076   My chart is a composite of all the PKPet 12/08/08 12:31:27 AM
#2075   Like yourself I trade ETFs and like to PKPet 12/08/08 12:06:42 AM
#2074   Pete, what kind of chart are you using? renkoron 12/07/08 10:58:35 PM
#2073   Thanks for all your help and patience. I PKPet 12/07/08 10:53:23 PM
#2072   Pete, this is the worst case senario of renkoron 12/07/08 10:03:46 PM
PostSubject