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How the zigzag indicator works in trade After the zigzag fixed the
lower point, the search for a turning point begins - until the movement down
(correction) from the maximum value does not exceed the indicated parameters.
As soon as this happened, the second point (in our example - the upper one)
is considered fixed. Then the indicator is looking for a third point (lower
for our example), etc. This tool has much in
common with such types of graphs as Renko,
cross-knit and kai, since the latter also serve as
a filter for minor price fluctuations. Such fluctuations distract the trader
from analysis and can even nervous, which negatively affects the results of
trade. In order to better
understand how this tool works, you need to realize that there is a constant
or a size by which we can measure susceptibility to price fluctuations, i.e.
filter. Thus, you can measure fluctuations, as well as distinguish between
small, insignificant price fluctuations from more significant. For example,
if the Zigzag filter is 15%, then all price fluctuations that do not exceed
15% of the current are considered non -essential. And fluctuations from 15%
and higher in our example are considered significant. The bends of the zigzag
occur due to the fact that the quotation (price) changes to a specific value,
which is equal or exceeds the filter that we talked about above. For example, if the price
of the currency grows for a long time, then the indicator will grow with it.
Say, from 100 the price dropped to 89%with a filter of 15%, the indicator
does not change its direction, since the price did not drop by more than 15%.
If the price from 89% bounces up and continues to move, then the Zigzag
indicator will follow it until a critical, significant reversal occurs. Further. If the price, for
example, reached 120 and turned up to 100. The filter is tuned by 15%, so
such a price change (20%) is considered significant - the indicator line
makes a reversal and follows the quotation in the other direction. This
happens until the moment when the next significant price change occurs. Summing up, we want to
remind you that using the zigzag indicator as an independent tool for
analysis is not entirely correct. But as a
convenient addition to analysis - just right! Successful trade! Features of the Zigzag indicator Using this tool, it is
important to remember that the last segment can change its position depending
on changes in the current price. Zigzag is one of those indicators when a
change in the quotation can also cause a change in the previous value of the
tool itself. This feature (adjustment of values according to subsequent price
changes) makes the zigzag an excellent tool to analyze the already occurred
price changes. That is why you should not try to create trading systems based
on it: the tool is optimal to make an analysis of historical data, but not
for forecasting. To help, you can use Zigzag Alert Indicator MT4 in your
trading system. The zigzag indicates the
indicator, after which it connects the extreme points of the schedule, which
is defended one from one to a given percentage. |
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