bird & ron...I believe the most important thing in renko trading is choosing the box (brick) size.
Remember there is a caution by P&F gurus that 3 box reversals are normal market action.......what they are saying is that if you jump at a 3 box reversal, you could get whipped.
Since we want to act on a 2 box reversal (was a white trend, now the first red box is filled, or vice versa)..we need to fit the box size to the trading time frame.
Doing that is extremely important..of course we could use the default ATR..but I find that is often large for daily purposes.
I usually resort to trial and adjust measures..for the daily, I don't want a 2 box reversal (meaning white to red, or red to white) to trigger at less than about 5-6% moves on a 2X instrument.
So, I choose a box size in that range...look at the amount of whips over a few years..and adjust the size until the whips of 1 box reversals are infrequent to non-existant.
A whip that makes 2 boxes in a new direction doesn't cost much in return..and I tend to ignore them unless they are frequent. The breakeven return is 3 boxes filled in the new direction. More than 3 boxes filled before a reversal means a profitable trend has ensued.
Like everything else..there is no optimum that is always best..if the box size is quite large, the return suffers..if the box size creates many whips, the return suffers..there usually is a happy medium.
I do spend a good deal of time selecting the box size..once selected, I like to exercise discipline in honoring that 2 box reversal as a high-probability indication of a trend change, and make the appropriate re-positioning orders in my accounts.
I like Ron's ideas of putting more weight on reversal boxes that occur in OB/OS conditions. I think that has some merit.
Regards.
