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I'm absolutely devastated, don't know where I'm heading now
I don't mean to hijack the thread, but I am currently dealing with back testing of Renko bars. I understand the problem with back testing Renko bars, because the open of the actual bar is usually not where it is indicated to be on paper, and not where the back test would say your order was filled. I have seen this myself. I have back tested Renko bars, and the results are not accurate.
However, some vendors are offering Renko bars which can be re-drawn for back testing to reflect what the actual open and close would have been when your entry occurred. I am currently experimenting with Shark Indicators backtest Renko bars. There is also a universal Renko which claims to be back testable. You theoretically can use these bars to test for results when the entry occurred at the end of the bar, establish valid trailing stops, etc. Once they are converted back, they once again have the appearance of the Renko bars for trading in real time, but your parameters should be valid.
Do you, or any one else, have any opinions on back testing with these bars?
Can you help answer these questions from other members on NexusFi?
Not to encourage this already meandering thread further off topic... but this interests me a little.
Isn't the root of the issue with any kind of renko or renko-like bar on historical data that it masks the lack of resolution of minute-based data?
If your renko is created off of minute data, no matter how slick your renko logic is, you're not going to know which came first, the high or the low of the minute bar. Often this won't matter because the renko settings are not exceeded by the range of the bar, but sometimes it will matter.
Since renko bar painting demands knowing the direction of movement, you need tick data or realtime data to paint the bars correctly 100% of the time.
I don't see any way around it, unless you have a renko variant that will paint a single bar of a larger size for any case where the minute data doesn't give a clear indication of which was hit first (the high or low of the minute data that forms the next renko). Or any gyrations that happen within that minute data which would result in new bars.
Happy to be told I'm wrong on this...?
As far as tick data for building historical renkos … you would think it would be OK, except you've still got the potential for painting bars at prices that were never traded. Gaps and quick price movements will give the impression of fillable movement where really nothing is there.
Backtesting Renko...is not accurate … correct whenever I use renko for backtesting I always use slippage that is equal to the bar size. If my bar size is 5 then my slippage is 5....and if you can get positive results with that... you may have something. Here are some examples of Renko (normal bars filled in) and SIBTRenko from Shark Indicators...which shows exactly what happened.. notice there may even be skips in the BackTest Renkos however the "normal" renko shows something there... Attachment 286855
Folks, these are interesting questions, and there are threads devoted to them.
A discussion of backtesting can be on-topic here up to a point, since it can definitely be related to possible next steps for traders having trouble, but getting into the weeds of very specific bar types and their issues is starting to drift away.
If we can stay closer to the concerns of this thread, it will be better. Moving detailed discussions of other issues to threads that are more suited to them will keep the discussions, in both places, more useful to more members.
Thanks.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I’m pretty new and know nothing but Kris did a video on Lizard Renkos and I think that their renkos solve this problem. I can’t find the video on this board but it’s in one of the Lizard threads. Hope this helps.
I know we have to get back on topic, but quickly, are you saying the back test Renko was accurate for back testing? They look to me like ordinary candlestick bars in BT mode.
Mike, I amd only replying to this one post CE ause of the attachments. Any further questions, and I will move to another tread. Thaks.
Do you mind explaining to me why one would hedge rather than simply trade a smaller position size? Since hedging would effectively offset the profits on the trade. I sincerely don't get why or when hedging is beneficial?
Does that mean your position size on the trade should be max 2% of capital? Or the position size (in dollars) can exceed 2% (eg. use half the account) but stop out of the trade when 2% of the account is lost on the trade?
How do you trade all of these simultaneously? I assume they are all automated? If so, can I ask what platform you use to trade these systems?
Could you please recommend any good books for a beginner-intermediate trader to learn to develop these systems, and to structure good options trades when the probabilities are as good as a coin flip?
The 2% figure comes from risk-of-ruin Monte Carlo simulations done many years ago. It is used in Poker as well as trading. It applies to the amount of risk your are taking. For example: you have an account of $10,000. You would not want to risk more than $200.00 (2%) on each trade. I f your account drops in value to $5000.00 then your maximum risk could only be $100 (again 2%). The idea is you always risk the same amount on each trade (2%) and as your account shrinks, you risk amount becomes smaller and as you account increases your risk amount becomes larger. The percentage remains the same. It is designed to avoid risk-of-ruin when you run into a long string of losers.
You can of course adjust the percentage of risk. Many people advocate using a smaller percentage. I am in that group.
Persistence! Nothing in the world can take the place of persistence.
Talent will not ... nothing is more common than unsuccessful men with talent.
Genius will not ... Unrewarded genius is almost a proverb.
Education will not ... The world is full of educated derelicts.
Persistence and determination alone are omnipotent! Calvin Coolidge
