Replies to post #54179 on SPDR S&P 500 (SPY)

[leftyg]

The ATR(14) is the default size. I find that is a bit too big for me. I am using a value of 1.5 on the MVV chart..and a ratio-equal value of 1.1 on the MZZ chart. That is about .67 of the ATR value.

In general, one would want to have a box size large enough so that the period being used (15 min, 60 min, daily, weekly) is not whipsawed often within that time frame. For a daily chart, I think that should be about 3-4% to indicate a reversal. You decide for yourself what you think is right.

Remember that whipsaws are return reducers..but you want the box size small enough to capture a good part of the next trend up or down..and, perhaps suprisingly, making the box size much larger does not necessarily eliminate whipsaws..but it will reduce the return. Choosing the best fit of box size is important.

Off to church..see you later on. Regards.

[learningboutinv]

Gleno, apparently the ATR on renko is the same as the Average True Range indicator, meaning instead of selecting say MACD, you can select Average true range. Renko's ATR is also automagically set to 14. So it takes the average 14 closing days and spits out a number. You can set Renko ATR to High/low instead to get an average of the high/low prices over 14days. Anyhow, the ATR closing price number calculated over 14 days is default and used for the renko brick point size.

There is one caveat however. If you use the default ATR 14 with Renko, the ATR Renko value is different than the Average True Range indicator value of 14 when applied on the bottom of the renko charts because the Average True Range indicator is being applied directly on the same brick sizes of Renko. However, if you use Average true range indicator on candlesticks or bars the Average True Range 14 will be the same as the ATR 14 of renko if you chose High/low on Renko's ATR. So I believe Renko applies ATR 14 to bars or candles before the bricks are formed.

The Average True Range 14 indicator is calculated based on High/low prices over 14 days. The Renko ATR 14 can either use the closing price over 14 days to calculate points(default) or High/low over 14 days.

Also, I completely agree with what lefty says after more experimenting and reading the renko board and other websites on renko. Getting an ATR movement for say QLD for the past 14 days is a big move and for a price reversal it will take 2 bricks. Also, it is better to use Renko with a well-behaved stock. Not a stock with a super high beta with lots of volatility and whipsaws since Renko is used for trending.

So for example ATR14 = 3.6 for QLD which is the average price point movement for the past 14 days using the closing price of each day. For QLD to reverse up, it will take a movement of 7.2 on the renko chart. That is a huge movement. Imagine buying a quarter position at 500 shares. That is leaving $3600 on the table.

What I am thinking about is the following: Using Candlesticks get the ATR over the past 6months in order to get the price movement/range of QLD. (This way 6months will get the volatility when QLD moved 6points in a day which was some days in Jan08 and for some days QLD only moved 2points from high to low.) Divide that in 2 and that will equal your points. So for QLD, ATR 120 = 3.36/2 = 1.68 on the daily. 1.68 is the pts that I am going to use and a reversal will show after a point movement of 3.36.

Sorry about the long winded message. Hopefully that helps you out and remember the smaller the points you can get whipsawed, so finding that balance is delicate. Either you get whipsawed or you leave a bit of your profits on the table before the next trend reversal if you are not careful in selecting proper brick sizes.