Occam's Razor
Everything should be made as simple as possible, but not simpler.
That is a famous quote, sometimes written under "inspirational photos" of influencers on social media. It is attributed to Albert Einstein, he however expressed something more rough than that.
Einstein quoted: It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience.
Even though he was not a philosopher, he adopted what William of Ockham proposed hundreds of years ago. He believed that an explanation must come from the simplest set of elements. Occam's Razor is what defeats "Last Thursdayism" aka "the Omphalos hypothesis". Simplicity is stronger than complexity.
But enough of history and philosophy, I hear you say. This is an investment platform after all, we are tired of reading about theories.
The thing is, if you don't think before you buy, you end up in a loophole.
In an investment strategy that has no way in, and no way out.
From my mere two years of stock market analysis, I have one rough quote for your social media pics:
Clear your mind. Choose wisely your favorite ship, and pick your favorite destination.
Now sit back and relax. The time will come when the wind blows fair to your ways.
It is not exactly doric, but it will do for now.
So basically, there are two things you must decide and believe in. The type and the timing of investment. Contrary to what some may say to you, you actually need both.
If you aren't selective of your investment, then you better hope to break-even to inflation.
If you don't let the times ripe, then you don't do anything more, or less than a hodler. (or similarly an inflation mitigator)
The point I am trying to make is simple.
That investing must be simple...
...and charting must be simple. Hence Renko charts!
Some time ago, I discovered the interesting properties of these charts.
They "normalize" growth, from violent spikes to perfect pyramid fractals.
To an untrained investor, this chart is an oversimplification.
How on earth Minecraft is better than reality?
Answer: Legibility and Indicators
Legibility: The violent nature of stocks is tamed from this chart type. This was the original intention of the Japanese inventors.
Indicators: The unknown charisma of these charts is their magic behavior with indicators. They give powerful new ways to analyze prices.
So how and why do Renko charts surpass candlestick charts?
In classic (timed) charts like candle, the baseline is time. Rapid price breakouts and deadly black swans may come incredibly quick. Since most indicators depend on some amount of lookback (the length of a Moving Average for example), they under-weigh rapid events like black swans, and over-weigh slow, and perhaps, insignificant price movements.
In timeless charts like Renko, no detail is hidden. The appropriate amount of importance is shown to each point of price history.
With candles, momentum is time-based. With cubes, momentum is price-based.
Renko charts, even though are a big simplification, provide an entirely new visualization of charts, and all of that without exotic coding. Your indicators still work.
DXY shows subtle but important differences in bull-market analysis. More advanced indicators show this even clearer.
As a theoretical experiment, a trader waited for two candles of confirmation after KST broke down.
NVDA paired with Renko reveals its true face. Divergences hidden in plain sight.
And all of that with the most rudimentary of tools, MACD.
The point Renko tries to make is simple. A stable growth is a decisive growth. Renko punishes stocks that begin to exhibit backtests / retreats in price. By simplifying technical analysis and price data, the deep ocean becomes a child's pool. Accessible by everyone.
The point Grigori try to make is simple. That trading should not be considered to be astrophysics, because it clearly is not astrophysics. We are not Einsteins (some may be), but the majority are not (including me). We, as humans, need clear and simple arguments and data in order to make robust conclusions.
Final thought: The investor's mind must keep clear of chaotic charts and concentrate on picking the right ship, at the right time. Select beforehand your ultimate target. The earth is round. If you keep sailing without stopping, the time will certainly come, when you will reach ground-zero.
Tread lightly, for this is simple ground.
Father Grigori.
P.S. I will keep this idea updated with any interesting Renko vs Candle charts I discover.
That is a famous quote, sometimes written under "inspirational photos" of influencers on social media. It is attributed to Albert Einstein, he however expressed something more rough than that.
Einstein quoted: It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience.
Even though he was not a philosopher, he adopted what William of Ockham proposed hundreds of years ago. He believed that an explanation must come from the simplest set of elements. Occam's Razor is what defeats "Last Thursdayism" aka "the Omphalos hypothesis". Simplicity is stronger than complexity.
But enough of history and philosophy, I hear you say. This is an investment platform after all, we are tired of reading about theories.
The thing is, if you don't think before you buy, you end up in a loophole.
In an investment strategy that has no way in, and no way out.
From my mere two years of stock market analysis, I have one rough quote for your social media pics:
Clear your mind. Choose wisely your favorite ship, and pick your favorite destination.
Now sit back and relax. The time will come when the wind blows fair to your ways.
It is not exactly doric, but it will do for now.
So basically, there are two things you must decide and believe in. The type and the timing of investment. Contrary to what some may say to you, you actually need both.
If you aren't selective of your investment, then you better hope to break-even to inflation.
If you don't let the times ripe, then you don't do anything more, or less than a hodler. (or similarly an inflation mitigator)
The point I am trying to make is simple.
That investing must be simple...
...and charting must be simple. Hence Renko charts!
Some time ago, I discovered the interesting properties of these charts.
They "normalize" growth, from violent spikes to perfect pyramid fractals.
To an untrained investor, this chart is an oversimplification.
How on earth Minecraft is better than reality?
Answer: Legibility and Indicators
Legibility: The violent nature of stocks is tamed from this chart type. This was the original intention of the Japanese inventors.
Indicators: The unknown charisma of these charts is their magic behavior with indicators. They give powerful new ways to analyze prices.
So how and why do Renko charts surpass candlestick charts?
In classic (timed) charts like candle, the baseline is time. Rapid price breakouts and deadly black swans may come incredibly quick. Since most indicators depend on some amount of lookback (the length of a Moving Average for example), they under-weigh rapid events like black swans, and over-weigh slow, and perhaps, insignificant price movements.
In timeless charts like Renko, no detail is hidden. The appropriate amount of importance is shown to each point of price history.
With candles, momentum is time-based. With cubes, momentum is price-based.
Renko charts, even though are a big simplification, provide an entirely new visualization of charts, and all of that without exotic coding. Your indicators still work.
DXY shows subtle but important differences in bull-market analysis. More advanced indicators show this even clearer.
As a theoretical experiment, a trader waited for two candles of confirmation after KST broke down.
NVDA paired with Renko reveals its true face. Divergences hidden in plain sight.
And all of that with the most rudimentary of tools, MACD.
The point Renko tries to make is simple. A stable growth is a decisive growth. Renko punishes stocks that begin to exhibit backtests / retreats in price. By simplifying technical analysis and price data, the deep ocean becomes a child's pool. Accessible by everyone.
The point Grigori try to make is simple. That trading should not be considered to be astrophysics, because it clearly is not astrophysics. We are not Einsteins (some may be), but the majority are not (including me). We, as humans, need clear and simple arguments and data in order to make robust conclusions.
Final thought: The investor's mind must keep clear of chaotic charts and concentrate on picking the right ship, at the right time. Select beforehand your ultimate target. The earth is round. If you keep sailing without stopping, the time will certainly come, when you will reach ground-zero.
Tread lightly, for this is simple ground.
Father Grigori.
P.S. I will keep this idea updated with any interesting Renko vs Candle charts I discover.
Comment
Simple & Poors 500
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.