SPY 60 MINUTE- Several things came to my attention in reviewing this chart and the initial "rules" established- for entry and exit. I intended to set up a 'RULE ' to reduce entry in a declining trend- and that works initially- When price is uptrending, the exit and entry rules could be modified differently from a downtrending condition. Some of the best gains are by getting into an entry early in front of a trend. This is an initial assessment- Once the rules to be within an uptrend are met, taking the early entry is the more profitable approach. The sideways chop zone is a separate matter- recognizing the sideways chop as a zone perhaps requires a different -modified approach. Subject for another day and further study. An active trading approach protects one from the potential downside. Understanding what the downside may be could best be evaluated by understandint the higher time frame trend, and recognizing where the faster chart price is in relation to that higher time frame.
I don't have as much time as I'd like- but I want to follow up with the prior post chart-with an additional chart that simply includes an ema (exponential moving average) that can help to define the chart time frame trend direction. There are different trends within each time frame- Before relying on some moving average- lots of homework needs to be done to see if it really has any relevance or benefit to one's trading style. Personally, I think moving averages are important in my own trading. I struggled with the description for a bit- but moving averages represent " flexible" trend lines- as opposed to rigid -, linear trend lines- They essentially assist in defining changes in the trend direction- price having upside momentum, losing momentum, consolidation, and price weakness (declining) . Price Action Traders know that evaluation of the current bar is based on what leads up to that bar with the prior price action- It is a process of analysis -evaluation . As a trend trader - I don't try to do the bar by bar - hour by hour- day by day analysis. - I will assume that the price struggles that occur during the day -or the week- all of the high and lower battles, will be averaged out - and that the longer term average of those battles are displayed by where price is relative to the moving averages. I want to know who is standing at the End of the Day . End of the Week.... E.O.D. This chart introduces the EMA- and where price is relative to it. The EMA is essentially an averaged flexible trend line- my definition........ But it does a very decent job of telling the chartist in which direction the present chart is heading. If the ema is moving higher, and price is above, we have an uptrend- If the ema is downwards, and price is below, we have a downtrend. Depending on our time frame, we can substitute various emas values- 10, 20, 50 etc. Each value will provide a different perspective...... I think one needs to hold a mindset in a trade as to whether price is favoring an uptrend, downtrend, or just consolidating- Adding an ema into the chart gives that perspctive. i haven't attempted any analysis per se- but a trader should consider this chart and when they would want to be in and out of this position.
A friend following this thread on pm commented to me that RENKO charts appear to be too good to be true. Almost makes it too smooth- My friend is correct- As i responded to him with all of the things RENKO does not do, I realized something i was aware of - but did not really recognize the significance- until you do the basic math and extend it out over a longer duration. When you look at a logarithmic chart, it is adjusted to keep the bar or candle size proportionate - The lower values are wider , and the higher values are shown smaller. Look at a 10 year chart to understand how it is posted on your screen- notice that in an uptrending chart, the lower values are higher or taller than the more recent values- This simply keeps the moves proportionate - relatively equal in terms of significane to present price value - This would mean that a $1 up move on a stock priced at $20.00 wqould also be viewed exactly the same size as a $5 move on a $100.00 stock- The movement that counts is not the dollar amount- it is the % amount. 1/20 or 5/100 is exactly the same size move proportionately- or % wise. I have understand this % concept to equalize trading values for a long time- I simply did not appreciate the significance - over price movements- how this affects a simple RENKO chart over a price period of INcrease or Decrease. I just like the stability of Renko charts, but as I explore them further- My stockcharts program does not calculate them - when I look back in time on a longer time frame - proportionately. The net $$ value remains the same as the starting period. This becomes very important over time- because the Renko chart we see on my postings, historically is not accurate. The renko chart I can calculate through stockcharts gives an ATR value starting at the last date on the chart- and the lookback period is whatever one includes- If i look back 14 periods on a weekly chart, I get an average over 3 months for an atr value- That $ value can be converted to a % of price movement. On the SSO trade, a single -current- present day ATR value is 1.67% as "normal. Understanding this as a % value is more significant than thinking about this in dollar amounts. As i extend this ATR value back over time and ask my computer to go from a 6 month chart to a 6 year chart, it inputs the exact same information when it draws each brick.. Each new brick is based on a $2.25 price movement. If price stayed in the $130 to $135.00 sideways price channel over the 6 year period, this $2.25 value would be fine in generating equal sized bricks, and We would get an accurate chart movement represented. Notice in the SSO (SPY 2x) chart I am posting that goes back to 2009- The same $2.25% VALUE GIVEN TO THE PRESENT DAY atr IS EXTENDED THROUGH STOCKCHARTS BACK TO 2009. 2015 value- each brick represents a 1.67% price movement. Going back to 2009 and a net $20 price value,, each brick represents over an 11% price movement. There is nothing wrong with the concept of using RENKO charts- However, the charting program one uses needs to be able to make an accurate ATR conversion - and not use a constant value when price is significantl;y lower- The picture i see is not accurately represented - As i go back in time, over lower price valuations, there would be more additional red bricks within the trending periods, and more red bricks within the declining periods. Going forward in the future- If price appreciates, a 2 ATR value stop-loss gradually becomes a tighter and tighter stop-loss as price appreciates higher- this brings us to the concept of volatility- and what is "normal" and what one should allow for in their positions- A stop-loss based on a 1 ATR volatility value will not remain long before being taken out- I want to get this chart posted . I like the concept behind Renko charts- but as i gain a deeper understanding- I realize i would need a chart program that makes the conversion based on % moves and not on dollar moves. I do not think stockcharts does that- but I will write them to see if such a setting is possible- in their charting program. Otherwise, as my friend pointed out- the picture is too good to be true- - at least over the longer and higher term movements- It may be more appropriate for a shorter duration- or backtested in smaller segments- I simply do not have the time to spend presently- although i think it would be advantageous to pursue that type of back test- One could then feel confident that a certain % was the norm, and give it some room. My apologies as i was promoting this as something i did not fully understand as well as I should have....
I hadn't looked at my accounts daily for a few days- Markets only had a 1/2% drop from making the new highs-Not much of a decline- but..... I just chose to tighten stops under the pullback lows here in all positions- Fortunately most are higher, but the port is still down 2.5% or so - PJP has been the $$$ gainer in the IB account. I have been somewhat out of touch with the markets actions- and getting more defensive feels right- This is an emotional and discretionary action- but one I can live with and return another day if stopped out. Where i set my stops is based on weakness on the 2 hr chart- I was hoping I could emply the Renko chart further- but since i can't effectively calculate how to backtest it- and can't belive the charts i see- going back to the charts i know for the time being.
I want to get this chart posted . I like the concept behind Renko charts- but as i gain a deeper understanding- I realize i would need a chart program that makes the conversion based on % moves and not on dollar moves. I do not think stockcharts does that- but I will write them to see if such a setting is possible- in their charting program. Otherwise, as my friend pointed out- the picture is too good to be true- - at least over the longer and higher term movements- It may be more appropriate for a shorter duration- or backtested in smaller segments- I simply do not have the time to spend presently- although i think it would be advantageous to pursue that type of back test- One could then feel confident that a certain % was the norm, and give it some room. My apologies as i was promoting this as something i did not fully understand as well as I should have.... View attachment 149964 [/quote] No apologies needed. You were not promoting, but enthusiastic. We all are learning and bouncing ideas here. Good job, you helped us to find RENKO does not quite work.
No apologies needed. You were not promoting, but enthusiastic. We all are learning and bouncing ideas here. Good job, you helped us to find RENKO does not quite work.[/quote] Thanks for that understanding- I still think Renko may be a valuable concept to perhaps employ in one's trading, if one is mindful of the possible price value to percent valuation over extended periods of higher or lower values. Backtesting over an extended period with price at a considerably lower value, Renko brick proportionately a larger value - I don't think that gives good data. Backtesting over a sideways -rolling range of 10 to 20 percent price appreciation would likely give useable data. Converting the findings of RENKO dollar value to a % value would be useful even if one uses only price action- comparing what the Renko suggests is occurring with a bar or candle chart would still be instructive. E mailing stockcharts support the following: Please tell us about the problem you are seeing OR enter your question/feedback for us into the space below. IMPORTANT: If we have already sent you a response to your question via email, please do not use this form to reply to us. Instead, use your email program to reply to our response. Issue is the Box size of a Renko chart- does not adjust as price value changes from the value determined by the ATR one inputs. If price is $100 and the ATR is $2.50- this represents 2.5% of the current price as the average. When I try to backtest a price chart using Renko- the higher priced ATR value is not adjusted in the brick size over time and a lower price- This gives a false impression as the lower priced stock - say it's at $50.00- a $2.50 brick size now represents 5% of the lower price. This gives fewer bricks forming over the course of a move, and a misleading picture of what actually occurred- Is there a way to adjust the Renko chart to display bricks based on the ATR as a % value versus a dollar value? If the ATR was 2.5% of a $100 stock- the brick would represent a $2.50 value. If the ATR was 2.5% of a $50.00 stock, it would represent a $1.25 size movement. A % calculation for the ATR size/value would generate accurate information in terms of when a new brick was generated over the duration of the chart- vs a price calculation.
I haven't given up on Renko charts- just need to understand the limitations in viewing a chart that has a lot of range in price will give a false sense of smoothness that is not there. Backtesting or viewing charts in smaller price fluctuations will yield fairly accurate results. This chart is a 15 minute hi-lo and the difference from the high price value seen to the low price seen is minor. Note that the hi-low chart gives the ATR value as $.25, and the same chart CLOSE gives the brick a $$.30 This similarly would prove true on a daily chart over narrower price ranges as well. It just cannot be backtested over the wider period accurately.
I did receive a response from Stock charts support today- They suggested I could use the points setting instead of the ATR. That is still the similar issue of not portraying an accurate picture over larger swings in price value. I wrote them back explaining why I think a % setting is more appropriate- over ranging price values- I don't think i will see a % box any time soon. This does bring up a good way to evaluate ATR- Since ATR gives one the Average of price range- and gives a numeric value- convert the numeric value by diving by the asset value in the chart to get the % that value represents. If one back tested over a period of charts over time- one would gain a good idea how many % a typical brick would represent over different price ranges. This could be useful in understanding average volatility as a % of movement- not as a dollar amount. If volatility appeared to be 5% on a daily chart over time, a quick calculation could keep one's Risk level equivilant. Here was my email explanation as to the value of thinking in terms of %- thank you Cole for your prompt response. I may still misunderstand- but using the pts setting still retains the same issue of not being relative in net value over a larger increase or decrease in price. You have to consider the effect of relative value of the setting compared to the price value. What % does it represent? If i had purchased $1,000 of a stock at 100 (10 shares) and had a 5 pts setting- a new brick is generated at 95- that represents a 5% decline.If that was my stop-loss level, I would be taken out with a loss of $50.00 . 5 pts x 10 shares. or a 5% position loss. when I purchase $1,000 of the stock lower @ 50 - I own 20 shares . If I use a 5% setting, that is $2.50 - and stops out $2.50 x 20 - also for a $50.00 loss. or a 5% position loss. If i am using 5 points - the 10 shares@ $100 lose 10 x 5pts = $ 50.00 or 5% The 20 shares at the lower $50 entry lose 20 x 5 pts = $100.00 or 10 % By programming RENKO using a % value, it would allow price to fluctuate, but a position's % value at RISK would be the same. Also, that would make backtesting over a range in price value basis as accurate.. I don't know why a % capability would not be more relevant- as long as it was able to adjust to the increase or decrease in price. Thank You,
Raised stops were hit today SSO, DDM,TLT-in the IB account. BRKB stopped out previously . Sold HACK, CURE, XLE - XLF is at my entry cost with a stop $.10 below- Tomorrow will be the day -Yellen spoke today- Jobs report tomorrow. Winning positions- PJP, XBI- MAKING NEW HIGHS- .
iN MY 401K i AM RESTRICTED- I have a selection of mutual funds I can "invest in" - The company that brings these funds to market actively manages the different funds, charges an expense ratio, 12-b-1 fees, and there are undocumented turn-over-transaction costs- All come out of my account as a combination of fees called the Expense ratio, 12.b.1; and transaction costs- since I am in an IRA, I am not charged the capitol gains due to the turnover- but the holder of the fund is charged the transaction costs and may have to pay capitol gains whether they sold any shares or not- because the management did. All the more reason to learn about passive- low cost investing with Vanguard. Because the overall company account is large enough due to the pool of monies contributed by other employees, I am not charged with a load fee or transaction costs, but i cannot put in a stop-loss under a position, and i cannot move more than $4,999.00 in any day out of a single position without being "locked out" of being able to make transactions in that fund for a 30 day period- Vanguard has a similar lock-out- but after 12 such transactions . The reason the underlying company does this is to discourage trading of the funds and market timing. Mutual funds are generally actively managed, and hope to exceed the performance of the benchmark index- Most fail to deliver additional gains after costs that beat the index. - This is an important point to comprehend- and I would encourage any reader in a similar position to look at Vanguard for the retirement IRA or 401. The specific trade i am illustrating here, is that the one Fund- AGTHX- US growth fund- has hit a recent market high after months of sideways and choppy price action. Going back to the concept of keeping it as simple as possible, I am posting a chart that simply has a moving average (7 ema) displayed- You can determine - without seeing the price - when the trend is increasing- the ema is rising- and when the trend is declining- because the ema is turned downwards. The ema line is a lagging indicator- It is an average of the prior 7 periods - and because it is exponential, it gives more importance to the more recent periods than the earlier periods in the 7 periods- Price will have to go below the indicator line before it ever shows a downward slope- Conversely, price will close above the declining ema line in order to reverse the line direction- Understand then- that Indicators follow price- or Lag behind. In this chart - i am posting the 7 ema line and the 12,26,9 period MACD indicator. The MACD is (moving average convergence/divergence) simply takes 2 moving averages of price and determines whether the momentum is increasing or decreasing or is flat. This is usually averaged from a 0 base line . The actual indicator with lines is useless and delayed- My opinion- Forget the lines- learn the histogram. The "Histogram" a series of vertical bars above or below the 0 line is of far greater relevance. If someone wanted to choose a single indicator for collaborating a trade decision- this is a good place to start- IMO- One needs to verify this on what they trade to see if it is of any benefit. As the bars increase above the 0 line- price is appreciating, momentum is favorable- As those bars start to decline in height relative to the 0 line, the momentum is slowing- There are 'Divergences'- a slowing macd histogram does not mean that price is about to drop today or tomorrow- But one should be aware that buying strength is not as enthusiastic as it initially once was. This chart uses a 12.26.9 'standard setting' which is slower- more cautious- to respond to price movements- AGAIN- Indicators LAG and indicators are built on smoothing out price volatilities. Using an indicator, you will not leave a trade at the top nor enter at a bottom- You will be in the narrower -but 'safer' zone. I am selling my allowed amount in this position starting tomorrow- The ema line has reached an all-time high, is starting to turn- What the reader cannot see is that price is under the turn- else the ema would not show a weakness- This turn lower also coincides closely with the action of the MACD indicator. For the purpose of illustrating the example- the macd histogram often indicates the divergence in buying and selling momentum by the height and distance of the histogram bars above and below the ) line. This is not always an absolute signal to exit or to Buy- but look at the crossover from the o lines - and look at the decreasing bars from the high of the histogram preceding- both above the 0 line and below- I don't typically use this indicator- I generally rely on just moving averages and price- but in terms of the Mutual Funds, weakness in the indicator and weakness in the ema/fund price suggests this may be a good time to lock in profits. The 'divergence' of the indicator can be easily misinterpreted- and price can rally long after the divergence is obviou s- so ultimately price action is the #1 indicator.