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ZigZag Combining with MACD
Hi Henk,

I can't answer your question, but maybe you can help me with mine. I've been told that you can't use peak/trough or that zigzag formula's in a trading strategy b/c they look forward. From what I understand only the values of the last leg of the indictor can change. I was trying to build a strategy based on the last peak/trough, but it's not dependent on the values after? Are you aware of the limitation? If so, do u know when/if it is possible to use these indicators?

Thanks,
Stewart

Stewart,

On page 528 of the users manual there is an explanation of the ZigZag indicator. Notice that the explanation states that it is a visual indicator and is also dynamic. Visual indicators are useful for viewing charts and usually support some other indicator. The example used was an Elliot Wave.

A dynamic indicator means that it will indeed change. The best example is a trigger line (point at which a trade is triggered). Using a MACD you have the option of using a cross of the zero line or the cross of the MACD moving average to trigger a trade. The zero trigger is considered stagnant while the moving average is dynamic.

Hope this helps,

Preston

Stewart,

Yes the last leg is always OK, but that is the weakness of the zigzag. I'am aware of that. You can reduce that weakness e.g. by taking a long period for the zigzag and by combining with macd and or other indicators, e.g.:

ZigZag Combining With MACD

Cross(
-0.1,If(LLV(If(Abs((Ref(C,-1) - Ref(Zig(C,12,%),-1))),>,0,0,1) *
(If(Ref(Zig(C,12,%),-3),<,Ref(Zig(C,12,%),-4),1,0)) * (-1),14),<,-0.5,-1,0) *
If(MACD(),>=,Mov(MACD(),6,E),1,0))

Henk

Henk/Preston,

Thanks for the suggestions. I'll give them a try.

Stewart

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