I want to share something important that I've observed when using the BSP indicator on Renko charts. This pertains to V1 and V2.01 because unlike V2, both versions do not attempt to eliminate wicks out of consideration in the calculations.
I made this observation a while back when first testing out the BSP indicator:
TransparentTrader wrote: Tue Dec 27, 2022 2:59 am
So far, I noticed something interesting on the S&P500 where I use 1-point Renko boxes and a setting of 100 for both moving averages and using EMA for both averages. The WORST loss I can encounter on any trade is a total of 2 boxes before the indicator tells me to get out and take a trade in the reverse direction. Usually the loss is either 1 brick or break even. I need to do more testing but with this one indicator I've virtually eliminated the need for a stop loss when scalping the US indices at NY market open.
And right now the EMA, double EMA, and triple EMA seem to consistently give the best results for profitable entries and exits. Lots and lots of experimentation ahead of me, yet it will be easy to do thanks to the efforts of mrtools and kvak.
Based on the math above and my Renko box settings for the S&P 500, the WORST possible trade loss of two boxes is equivalent to 2 points (ex. 4902 -> 4000).
But this also applies to the US30 if I use 5-point renko boxes (ex. 30,000 -> 30,005). Since two boxes is the worst loss I can experience in the event a trade immediately goes against me the second I open a position, I will not lose any more than 10 points on a single losing trade.
I imagine the same pattern will apply for any Renko chart I create as long as I use the BSP indicator with the settings described in the quote.
To recap, my best settings so far are: EMA used for both moving averages, a length of 100 for both averages, and no other changes.
What I would like to eventually reverse engineer is the following:
- How many boxes of profit I need before price action goes in the opposite direction of my trade and BSP signals me to exit the trade with a loss of -1 boxes
- How many boxes of profit I need before price action goes in the opposite direction of my trade and BSP signals me to exit the trade with 0 boxes (breakeven)
- How many boxes of profit I need before price action goes in the opposite direction of my trade and BSP signals me to exit the trade with a profit of +1 boxes
- How many boxes of profit I need before price action goes in the opposite direction of my trade and BSP signals me to exit the trade with a profit of +2 boxes
- etc.
Why does this matter?
Take a look at what
the MADX indicator I requested a while back looks like on a NAS100 Renko chart where each box is worth 5 points (12000 -> 12005):
Notice how the losses are very small and yet when there is a trend, the indicator keeps you in the trend and prevents you from exiting prematurely. Even if you do exit early, you still do so with a decent profit.
I need to get some pictures of what this looks like with the BSP indicator, but I can tell you
the BSP indicator will keep you in the trend for even longer and the losses are even more minimal. With any of the three major US indices (S&P500, NAS100, US30) there is enough volatility such that true price consolidation rarely happens. Even in ranging conditions you can still scalp mindlessly according to the signals and walk away with slight profits, breakeven, or slight losses.
I still need to optimize the BSP indicator and ideally add in 1-2 more indicators to truly create a system where the best entries and exits always exist.
But rest assured I am getting closer and closer to finding a true market edge.
For instance, combined with smart money management, I believe it will be perfectly reasonable to set a minimum profit target of 100 points on the US30 with 5-point Renko boxes (i.e. 20 boxes of profit) and achieve a daily account growth of 5%. It could even be as high as 10% and possibly more on days where the US30 continually goes up/down by several hundreds of points.
I could set my stop loss to 20 boxes and risk 1% of my account, yet if I exit on the worst possible loss of 2 renko boxes (10 points total) I will not lose any more than 0.5% using nothing more than the BSP indicator with my described settings.
I'll stop there for now. Lots for me to experiment with and test in a live setting. Just thought this would be helpful information for anybody wondering how I intend to use the BSP indicator for trading!