Difference between Range bars and Renko bars.

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So maybe I'm just a tad bit sluggish on the draw but I never understood the difference between the two. I might be the only one. I decided to research and resolve my confusion. Just in case there is a few others who were aloof, here is a concise write-up derived from some trader's blog:

"The range bar measures a set range of price movements and when that range is met the bar prints. A renko bar does the same except the range has to be all in one direction for the bar to print. So with a 10 tick renko bar the range has to be all up or all down for it to print

Ex: A 10 tick range bar could open at 100.00 and have 5 ticks up to 100.05 and 5 ticks down to 99.95 and the bar would print. A 10 tick renko bar would have to have 10 ticks up to 100.10 or 10 ticks down to 99.90 before it would print.

Got it? I hope so it exhausted me explaining it.

So the benefits to both are when price moves quickly the bars start printing. We need the bars to print in order for our indicators to, well, indicate. It may be a shock for some but all our indicators are lagging. Sorry. They need the price bars to move in order for them to do their "magic".

Hope this cleared the air for any that were equally unaware.

 

Though this might rub a few people the wrong way, it's truth and must be said: The vast majority of those who use Range/Renko, use them incorrectly. Because of ignorance, they commonly use 10 pip bars or another fixed value for the input. This, in my opinion, is as equally difficult to trade as say a recalculating/repainting indicator. Reason being is that when the range is that small, though it looks beautiful historically, quite often in the majority of those moves, several of those bars formed in mere seconds, making it unrealistic to think that this could be traded real-time, efficiently and effectively. This, as a very good friend of mine says, "....only serves as mental masturbation ". If, somehow, there are a few managing to find success using this procedure, I bow deeply to your mastery this style. However, for us mere mortals, there is a better way.

I suggest figuring out how to normalize across pairs i.e. use something that gives you the RANGE of each pair based off certain parameters.

Hope this has been of some help to some bodies.

 

Automated vs Manual Renko

You are right that the time element can prevent effective manual trading though using an automated strategy can remove this obstacle. For me, using Renko bars in an off-line tester has resulted in roughly triple the typical profitability of many simulations as compared to range bars and increased the number of profitable indicator settings even more dramatically. Noise reduction compared to time-based bars is roughly 65-70% which is exactly why traders ordinarily use collaborative indicators - to hack their way through the noise.

Bar size selection is a function of the type of trading you are attempting and must match the "personality" of the indicator set, stops, etc. - it is tough to do one and then the other.

There is at least one more step to using Renko's effectively but, it requires the use of a fully offline system to perform. The result is a price directional noise reduction of another 10-15%. I'll leave that to your imagination what you can do with that.

Once you learn the secret of using Renko's effectively, the return to time-based or range-based bars only let's you play into the brokers' and liquidity provider's hands (my opinion).

 

difference???

they both work on their own time warp, simply put- a simultaneous world, which is offline. But other people seem to like it. If something cannot work on a 1MIN chart, it aint worth it (thats just my opinion). The whole idea of an offline chart should scare you witless...

 

where is this "noise" coming from by the way??

 

Hi Mike78,

The noise is coming from the only source capable of creating it - the 10 banks that make up 80%+ of trade volumes. The retail forex trade is far less than 5% of total volume and the pro trader tries to make money in between the fancy moves of the banks against each other. You have to assume they have algorithms that allow them to place $100M orders at most favorable pricing by making the market dance using moves to confuse the best and most widely used indicators. Renko's cut through most but, not all of this intentional confusion.

As an example, try using 7 pip Renko bars on the EURUSD. If you are using a platform that will allow you to see the "tails" of the Renko bars, you will be able to see the banks periodically drive prices to what a trader would use as an effective trailing stop at about 14 to even 23 pips during the course of a nice price move. This happens with enough frequency to seriously dampen some otherwise great profits and they know it.

 
DeadEye96:
Hi Mike78,

The noise is coming from the only source capable of creating it - the 10 banks that make up 80%+ of trade volumes. The retail forex trade is far less than 5% of total volume and the pro trader tries to make money in between the fancy moves of the banks against each other. You have to assume they have algorithms that allow them to place $100M orders at most favorable pricing by making the market dance using moves to confuse the best and most widely used indicators. Renko's cut through most but, not all of this intentional confusion.

As an example, try using 7 pip Renko bars on the EURUSD. If you are using a platform that will allow you to see the "tails" of the Renko bars, you will be able to see the banks periodically drive prices to what a trader would use as an effective trailing stop at about 14 to even 23 pips during the course of a nice price move. This happens with enough frequency to seriously dampen some otherwise great profits and they know it.

DEADEYE.

I used to believe the same thing, but it is not simply true; everything has noise in life including TSD-forums, its just a good idea to have the right tools, on the chart, to trade very well. Just think about it, if you wanted to have it off with a female, would you put a wall between the two of you, just because she is very loud and will put you off! (sorry may be not a good example). My background is shares trading from tick charts and a very successful one, but I wasted so much time in forex trying out "far-fetched" systems.... luckily I found what I needed and trade well on a 1MIN chart...so my motto is if doesnt not work on a 1MIN chart, I havent got time for it....but thats just the life of a pivot trader..

regards,

Mike

 
DeadEye96:
Hi Mike78,

The noise is coming from the only source capable of creating it - the 10 banks that make up 80%+ of trade volumes. The retail forex trade is far less than 5% of total volume and the pro trader tries to make money in between the fancy moves of the banks against each other. You have to assume they have algorithms that allow them to place $100M orders at most favorable pricing by making the market dance using moves to confuse the best and most widely used indicators. Renko's cut through most but, not all of this intentional confusion.

As an example, try using 7 pip Renko bars on the EURUSD. If you are using a platform that will allow you to see the "tails" of the Renko bars, you will be able to see the banks periodically drive prices to what a trader would use as an effective trailing stop at about 14 to even 23 pips during the course of a nice price move. This happens with enough frequency to seriously dampen some otherwise great profits and they know it.

By the way, how many successive good trades can be made with this set-up?

thank you

 

...

the difference between range and renko is like the difference between blonds and brunettes....o'h wait there is price bars!..I guess those will be the redheads....

 

Exactly

Pava:
the difference between range and renko is like the difference between blonds and brunettes....o'h wait there is price bars!..I guess those will be the redheads....

Exactly you've hit the point.

 

I had no idea anyone replied to my thread until just recently. Some info on here (Asante sana DeadEye96), minus the usual Pava anamoly.

I was slightly confused by DeadEye96's statement regarding how to squeeze out another 10-15% noise reduction but it's only the pursuit of perfection that piques my interest. The purported 60-70% reduction is enough for me. Was greed killed the beast.

Here is something that might assist in ones in their venture into range/renko bar trading.

Renko Bars – How To Backtest Renko | Forex Elite - Forex Trading Signals

I remember something similar to this being posted elsewhere on the forum but couldn't find it so I sought out the information off-site. It's relevant because I, like DeadEye, think that the this allows automation to become a realistic possibility. Only time will tell.

Peace and Blessings,

FFL

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