July 2014 Newsletter – Optimized Renko Bars for Less Noise and Precise Trading Signals / A New Spin on Volume For Forex

July 21, 2014

Optimized Renko Bars for Less Noise and Precise Trading Signals:

Introducing a new Add-On for NeuroShell Trader by Richey Enterprises

The Japanese developed Renko bar charts in an attempt to show price based upon a specified amount of movement in a single direction rather than reporting price based on a time schedule as in a 5 minute bar chart. Richey Enterprises has developed an entirely new concept in Renko bars – optimizable Renko bars based on price, volume, or a combination of both, that may be customized for each security.   The result is that your trading systems are based on less noise and subsequently generate more precise trading signals.

These innovative Renko Bars comprise the InterChart Tools Renko Bars Add-On for NeuroShell Trader that is sold by Ward Systems Group on behalf of Richey Enterprises, the developer of the InterChart Tools 1 and 2 Add-Ons.

The InterChart Tools Renko Bars are virtual bars capable of generating trading signals and performing their calculations using the same methods as traditional bars. Once a trading signal is generated by the Renko bar, both the trade and fill are correctly displayed on the open of the next bar of the base chart. For example, you can create a 0.25 range bar base chart and then add InterChart Tools Renko Bars to trading rules, visual charting systems, or predictions.

Included Indicator Types

InterChart Tools Renko Bars – are created based on a specified change in price that moves either up or down.

InterChart Tools Renko Volume Bars – are created based on the exchange of a specified minimum number of shares or contracts that move with price action either up or down.

InterChart Tools Renko Money Bars – are created based on the exchange of a specified amount of money stated in thousands of dollars that is calculated by multiplying the price times the number of shares/contracts that move with price action either up or down.

How Renko Bars Work

Renko Bars are only created when price has moved either up or down by the amount of the specified high-low range.  This amount is referred to as the brick size.  In all classic Renko charts, all bricks must be exactly the same size and the change specified in the high-low range must be in the same direction, either up or down, before a new bar is formed.

Different moving averages of InterChart Tools Volume Renko Bars can tell you when to go long or short – or even when to stay out of the market.

Why InterChart Tools Renko Bars Differ from Traditional Renko Bars 

The InterChart Tools Renko Bars include parameters that allow you to specify the number of ticks used to calculate the up part of the Renko bar as well as the number of ticks used to compute the down part. Since any bar’s function is to absorb noise and rising price jitter is often different from falling price jitter, the IctRenko bars permit an asymmetrical definition to accommodate this.  A Bar Size Multiplier gives you the option of setting the overall size of the bar once the up/down ratio has been configured.  IctRenko bars are only displayed on the chart when price has moved either up or down by the number of virtual ticks specified in either the Ticks per Up Bar or Ticks per Down Bar multiplied by the Bar Size Multiplier. NeuroShell Renko bars may, at the user’s discretion, be controlled by the NeuroShell Trader optimizer to identify the optimal bar size and noise absorption for a given algorithm or security.

The InterChart Tools Renko Bars Add-on for NeuroShell Trader sells for $695.  You need NeuroShell Trader Professional, DayTrader Professional, Trader Power User or DayTrader Power User 6.4x beta
or higher to use the InterChart Tools Renko Bars Add-On.  To learn more, visit InterChart Tools Renko Bars Add-On.

A New Spin on Volume for FOREX
by Philippe Lonjoux, Noxa Analytics, Inc.

Front and center on our radar now is the Forex Bid and Ask Volume, a new widget that we are Über excited about. Note that when I mention Bid/Ask Volume, I am talking about the number of contracts that the broker sees sitting at the bid/ask, not to be confused with the Tick Volume which is the number of ticks for a specific time frame.

Riddle me this…

Bid/Ask Volume shows no information about actual executions-only quotes. It is also difficult to see where the orders might be piling up because many brokers “dummy up” orders that disappear once they have finished hunting. Additionally, the orders are those crossing the broker’s books only; they can’t bemeaningfully used to extrapolate to the market as a whole. So, why would someone want to use Bid/Ask Volume on FOREX?

Well, we dropped the Volume data into the AME and those trades (surprisingly) have been quite productive.

We have to confirm that these results hold true for other time frames and trading vehicles. This is very much a work-in-progress so any feedback re: other information readers would like to see is welcomed.

Happy trading

Philippe Lonjoux

Noxa Analytics, Inc

E-mail:  noxapredict@yahoo.com

 

NeuroShell Trader Now Works with TradeStation

If you have a TradeStation account, NeuroShell Trader can obtain TradeStation data and send trades to your TradeStation account.

 

If you haven’t added ChaosHunter to your modeling toolkit, now is your chance.  Take a different approach to modeling the securities you trade and easily transfer the trading signals to NeuroShell Trader by inserting an indicator.
If you have a collection of NeuroShell Trader trading strategies and want to see which ones are capturing today’s market conditions, use the batch processor in the Power User versions of NeuroShell Trader to update and examine them all at the same time.  Trade the ones that show results. 
ChaosHunter Models Built with Ict Renko Bars Generate Winning Trades

by Marge Sherald, CEO

Richey Enterprises has developed an entirely new concept in Renko bars – optimizable Renko bars based on price, volume, or a combination of both, that may be customized for each security.   The result is that your trading systems are based on less noise and subsequently generate more precise trading signals.

Bars that contained less noise sounded like the perfect modeling clay for ChaosHunter, so I created a chart in NeuroShell Trader for the Mini Size Dow with a size of 1 range bar.  Then I added the Ict Renko Open, High, Low, and Close Bars and exported the data for use in ChaosHunter, along with the Open, High, Low, and Close data from the 1 Range Bar base chart.

ChaosHunter found this simple formula after only a short optimization period:


After importing the trading signals from ChaosHunter back into NeuroShell Trader, we generated the Trading Strategy below, which continued to perform well in the out-of-sample period.

The optimization period chosen for the ChaosHunter model displayed a variety of up and down movement, so that made it ideal to create a model that held up in the out-of-sample period.  The chart above displays the ChaosHunter trading signals in a NeuroShell Trader chart.

Future Work

The Ict Renko Bars exported from NeuroShell Trader were based on 1 tick per up bar and 1 tick per down bar, so the bars did not take advantage of the ability of the Ict Renko Bars to differentiate between up and down price jitter.  The next step would be to include the bars in a simple Trading Strategy in NeuroShell Trader that would be optimized in order to determine the appropriate tick up/tick down settings for the security of interest.  In other words, marry your trading system to the correct bar size of the security you want to trade.  

Those settings could be used when exporting the bars for use in ChaosHunter.

The InterChart Tools Renko Bars Add-on exists for NeuroShell Trader.  You need NeuroShell Trader Professional, DayTrader Professional, Trader Power User or DayTrader Power User 6.4x beta
or higher to use the InterChart Tools Renko Bars Add-On.  To learn more, visit InterChart Tools Renko Bars Add-On.

ChaosHunter Templates Save Time Building Models
by Marge Sherald, CEO

If you build many similar ChaosHunter models, you might want to store your preferred optimization settings in a ChaosHunter template to save time when creating models for new data files.

Once you’ve loaded a data file, you can create a template in three easy steps.

1.  Select Inputs and the Output

Select the inputs that you want want to use in your model, and then select the column that you want to be used as the output.

2.  Choose Optimization Settings

On the Optimization tab, choose either Evolution Strategy or Swarm optimization, a population size (larger populations take longer to optimize) and a random number seed used to begin the optimizer.  In the Stopping Criteria section, you can either select a number of generations without improvement, or just a certain number of generations.  You may also leave the Stopping Criteria blank and then manually stop optimization.

In the Optimization Goals function section, you can check one of the options that begin with Maximize R-squared for general purpose problems.  If you’re building trading models, choose either buy/sell cutoff (which builds a prediction and uses a threshold to make a buy/sell decision) or buy/sell true/false.  This goal is like buy/sell cutoff described previously, except that buy signals are generated when the formula is true (non-zero) and sell signals are generated when the formula is false (zero).  Add any other option to customize your trading system.


 Choose the optimization settings you want to use in your template.

3.  Select Potential Model Functions

On the Formula Tab, select the Formula parameters and Operations you usually use for the type of model you are building.   Also decide whether you want to include the Chaos Input in your model.


Save the Template

Once you have made all of your selections, go to the ChaosHunter File menu and choose SaveTemplate, which brings up the standard Windows file interface for naming the template and saving it on your computer.  The default directory is c:\ChaosHunter\Template and the file extension for a template is .CHTPL.

Loading a Template

You must have a data file open in ChaosHunter before you can load a saved optimization template.  Any new data files you load must include the same column names that were used as either inputs or an output in the data file originally used to create the template.  For example, if the original data file had columns labeled date, open, high, low, close, volume, RSI, and CCI that were used as inputs or an output, the new data file you want to use with template must include columns with the same labels, although they do not have to be in the same order in the new data file.  The new file may include extra columns.

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