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ZigZag
indicator. Classic depth deviation backstep tool Elliott
wave analysis is universally recognized as one of the fundamental methods for
predicting price movements in Forex. However, only
experts can independently restore the wavelength. The ZigZag indicator was developed especially for less advanced market
participants. Thanks to its use, you can make a breakdown by waves on the
price chart and predict changes in the market. The tool is suitable for work
in all time periods. The main
purpose of the tool is to determine the prevailing trend. The Zigzag
indicator is drawn based on closing prices, but much depends on the type of
trading platform used. For example, in Meta Trader, only lows and highs are
taken into account, regardless of the type of chart installed. The tool
functions as a price movement filter, allowing you to identify short-term
corrections and trade in the direction of the prevailing trend. However, it
also performs a number of auxiliary functions, demonstrating versatility, for example, it is suitable for identifying
strong price levels. Zigzag indicator settings To fully use the tool, you need to understand
its settings: Depth – here you need to specify the minimum
number of time periods to build the indicator; Deviation – how many points after the formation of the
next extremum will the indicator calculation begin. This is one of the key settings in terms of trend
building, as it indicates the required percentage of price deviation to
change the trend line; Backstep – the number of time periods
between which price extremes will be plotted. The ZigZag indicator has default settings of 12, 5, 3, which
determine the algorithm for constructing minimums and maximums. Despite the
apparent simplicity of using the tool, it is necessary to take into account
the redrawing factor. You can also see these settings in zigzag indicator
alert with info panel. When extremes are updated, new lines are formed on the
chart. Therefore, a trader should focus on other technical analysis tools to
build patterns, equidistant channels, trend lines and price levels. The main
thing is to understand that a zigzag is not a tool that will show you waves
exactly, it is an indicator - an assistant that can visually perceive a chart
with markings, but all conclusions regarding the use of this marking fall on
the shoulders of the trader. Basic
principles of using the tool The trend
develops according to Elliott theory, that is, 5 impulse and 3 corrective
waves. It is for their construction that ZigZag is
used, despite its versatility and the possibility of additional application for
constructing graphic patterns. It is worth noting that this is usually among
wave workers. A trader using other types of analysis may well use the
indicator to identify intraday patterns, for example, such as “head and
shoulders”. Well, if we describe why the Zig Zag Indicator
is needed in general, then we can highlight the following points: ·
correct breakdown of price movement by waves without taking into
account minor corrections; ·
constructing support and resistance levels based on extreme points
formed by the indicator; ·
points for drawing trend lines and constructing
equidistant channels. The
Candle Size Alert indicator will determine pips in live trading |
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