I am occasionally asked to code an EA for Renko charts. FYI, here is what I write when I refuse:
I have an old saying that I have adapted in light of experience. It used to be this: if it were that simple, everyone would do it and we would all be rich. It isn't, so we aren't.
I have adapted it to this: if it were that simple and any old idiot could have thought of it, then everyone would do it and we would all be rich. It isn't, so we aren't. It takes years of experience to come up with a simple concept that actually works.
So why are we not all rich? Anyone assosicated with Forex trading for more than about 5 minutes comes across Renko. Oh boy, but those bars are seductive. All those lovely candles marching determinedly in one direction. Gazillions of pips to be made.
So why do I not know anyone who became rich trading Renko candles?
Bob and I talked about this when we met last year. The problem appears to be time. It can take a long time for a Renko candle to form. The bigger the bar size, the longer the bar takes to form. The smaller it is, the more subject to 'chop' it becomes.
A bar that takes a long time to form will include substantial drawdown and the biggest mistake people make with Renko charts is not to show the wick. The wick shows how far into the hole the trade fell before recovering.
The smaller your bars are, the more you are going to be cut down by 'chop'. You enter on a favourable bar, but then close when the next bar goes against you. A completely unfiltered Renko system will go buy-sell-buy-sell ad infinitum during a ranging period and kill your account.
To aleviate this, you opt for a larger bar size - say a 20 pip bar. It can go 19 pips against you (don't all bloody candles instantly go against you the moment you take a trade, whatever system you are trading?). If it fails to make the 20th pip and cause an opposite direction candle which closes your trade, it has to make 39 pips back in the opposite direction in order to make one bars worth of profit. If it did make the 20th pip against you and closed the trade, you have to make two candles back in the right direction to make a profit.
Which is then neatly wiped out if the next bar goes against you. Hey, you made it back to breakeven. Well, breakeven minus spread, commission, swap etc. It might have taken hours or even days to get to that point. Try that when trading in the wrong direction with a high swap pair.
So, I repeat: I do not know anyone who became rich trading Renko candles. Granted, I do not know anyone who went broke either, but they will have stopped contributing to a Forex forum and so have dropped off the scene.
Forget it and go to the forums I direct you to here, where you can actually learn to trade. Up to you whether you take any notice or not of someone with such vast experience that he owns his own forum. You can take it now or you can take it after you have blown a few accounts. Your choice.
The above is from old experience. What follows is from later experience and adds to the above.
There is a reason for our collective failure to trade Ranko bricks successfully: Renko is bollocks.
Many of us have tried for years to fathom out why Renko trading does not work. Frankly, it should have been bloody obvious but most people here are as dim as I am. Ok, so I am dimmer than most, but that is not the point.
Renko trading should be a doddle, shouldn't it? All those bricks marching determinedly off in one direction, then reversing, then reversing again.............. An idiot could trade them.
So any cretin trading them will be super-rich within months, yet not every one contributing to SHF is a cretin. Some of them are seriously clever. A fair few, in fact.
So we return again to the inevitable question: why does trading Renko charts ultimately lead to failure?
One thingy of course is time. A 20 pip Renko brick could take a long time to form. I have watched 5 pip Renko bricks take what felt like a small ice age to form.
Then we come to the bit that very few people know and that I only learned recently, yet should be blindingly obvious to anybody with a firing synapse - which is where I absolve myself.
The blindingly obvious bit is the reason that back testing is such a waste of time. The only data a historical candle holds is the ohlc and open time. On an incidental note, it never ceases to astonish me that so many people ignore this piece of information and make no attempt to absorb its importance, but that is their problem. "There are none so blind as those who refuse to see" etc. Or mindlessly moronic etc.
Moving on. Those historical Renko bricks are not built up from a database of gazillions of actual ticks. They are built up from the ohlc data of ........ erm ........ some candles in Empty4's chart data. Anyone here any idea which ones?
Does it really never occur to anyone totally failing to make any sense of trading Renko charts to wonder why they are such crap now when they were so clear in the past? What you see historically on the charts is invented by RenkoLiveChart and will bear no resemblance to what was happening at the time.
The RenkoLiveChart ea that produces these abortions deserves to belong to the pantheon of the worst of the Crap Custom Abortions of All Time.
I post this here merely as an explanation folks, and will delete any further attempt to discuss Renko charts here. Post in our General Forex Discussion forum if you are delusional and wish to take the matter further.
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