Can Renko and HeikinAshi Candles Manipulate Your Backtest Results?
Renko, HeikinAshi, and other non-traditional types of candlesticks can potentially manipulate
backtest results due to their unique construction and the way they filter price movements.
Traditional candlesticks are based on the open, high, low, and close prices of a time period.
However, Renko and HeikinAshi candles use alternative methods to construct their candles that filter
out some of the noise in price movements.
Renko candles, for example, are constructed by only considering price movements of a certain
magnitude, rather than a certain time period.
This can potentially filter out some of the smaller
price movements and make it appear as though there are fewer trades to take, which could impact the
backtest results.
HeikinAshi candles use a different formula to calculate the open, high, low, and close prices for
each candle.
This smoothing effect can potentially make it appear as though there are fewer price
swings and therefore fewer trades to take, which could also impact the backtest results.
It's important to note that while these types of candles can potentially manipulate backtest
results, they can also provide useful insights and trading signals when used properly.
As with any
strategy or tool, it's important to thoroughly test and validate its effectiveness before using it
in live trading.