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Universal ZigZag Channel

This is a discussion on Universal ZigZag Channel within the Trading tools forums, part of the Trading Forum category; Just small article found about how to use zigzag indicator in general ======== The Zig-Zag indicator is extremely useful for ...

          
   
  1. #11
    Administrator newdigital's Avatar
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    Just small article found about how to use zigzag indicator in general

    ========

    The Zig-Zag indicator is extremely useful for determining price trends, support and resistance areas, and classic chart patterns like head and shoulders, double bottoms and double tops. The Zig-Zag indicators uses both swing highs and swing lows in its calculation:


    • Swing Highs: When a price (usually close) is both higher than the price previous to it and after it.
    • Swing Lows: When a price is both lower than the price prior to it and lower than the price following it.



    The Zig-Zag indicator can use both percentages or points in its construction. To construct the Zig-Zag indicator, there must be a certain percentage or number of points between a swing high and a swing low before a line will be drawn. The chart below of the E-mini Nasdaq 100 Futures contract visually illustrates the difference between a price retracement Zig-Zag of 3% and a price retracement Zig-Zag of 5%:

    Universal ZigZag Channel-zigzag1.gif


    Notice how in the chart above that a Zig-Zag with a retracement percentage of 3% makes more distinct lines than the Zig-Zag with a retracement percentage of 5%. The purpose of using a Zig-Zag with a larger retracement percentage is to help eliminate price noise that is not significant for the trader's analysis.

    The Zig-Zag indicator is extremely effective in filtering short-term noise and identifying significant trends and significant changes in market prices.

    Below is a chart of the E-mini S&P 500 Futures contract that illustrates how effective the Zig-Zag indicator was in finding areas of support and resistance and price breakouts:

    Universal ZigZag Channel-zigzag2.gif



    The chart above of the e-mini uses a 5% Zig-Zag retracement value; therefore, only price changes of 5% or greater are shown, helping a long-term trader or investor determine important areas of support, resistance, and areas of price breakouts.

    On the left of the chart, the S&P 500 was forming a triangle consolidation pattern. When prices broke resistance, a long-term buy was generated. During the middle of the chart, the Zig-Zag indicator was effective in illustrating that the S&P 500 was in an upward price channel. Buying in areas where price touched the lower support trendline and selling when prices touched the upper resistance line would have proved extremely profitable.

    Using the Zig-Zag indicator for shorter-term trades can prove profitable as well. The chart below of Intel (INTC) shows a classic chart head and shoulder pattern easily seen by the Zig-Zag indicator ($1 retracement):

    Universal ZigZag Channel-zigzag3.gif



    The easily identified head and shoulders pattern gave a sell signal when price on the right shoulder broke the upward slanting trendline.
    The Zig-Zag indicator is an excellent technical analysis tool for identifying classic charting patterns. The Zig-Zag indicator is also effective in reducing noise and helping the technical trader see the true market direction.

  2. #12
    Senior Member matfx's Avatar
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    Here is zigzag channel indicator by Coder's Guru. This indicator draw 2 trend line, upper and lower based on zigzag. Indicator comes with alert when price break above or below trend line.

    Universal ZigZag Channel-zigzag-channel.jpg
    Attached Files Attached Files
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  3. #13
    Administrator newdigital's Avatar
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    Quote Originally Posted by jaguar1637 View Post
    It looks like a Donchian channel system. isn't it ?
    Quote Originally Posted by newdigital View Post
    Not. Donchian channel is one of the variation of Price Channel (indicator/system) by Igorad.
    This system looks like commercial Braintrading but with new free indicators and fully recoded and improved.
    It is small article about how to use Donchian Channels





    Talking Points:

    • First find the trend to determine the trend
    • Learn to enter Forex breakouts using Donchian Channels.
    • Channels can be used to trail your stop and lock in profit.


    The Forex market is known for its strong trends, which can make trading breakouts of support and resistance levels an effective approach to the markets. To plan for such market conditions, today we will review a three step breakout strategy using the Donchian Channels.
    Let’s get started!

    Find the Trend

    The first step to trend trading is to find the trend! There are many ways to identify the trends depicted below, but one of easiest is through the use of the 200 period MVA (Moving Average). To begin add this indicator to your chart, and then see if price is above or below the average. This is how we will determine the trend and our trading bias.

    Given the information above, traders should look for opportunities to buy the EURJPY in its current uptrend as price is above the average. As well, the AUDNZD pictured below offers selling opportunities since the pair is priced under the 200 period MVA. Once we have this information, then we can plan entry placements for a potential breakout.

    Learn Forex – Daily Charts & 200 MVA




    Trading Donchian Channels

    Donchian Channels are a technical tool that can be applied to any chart. They are used to pinpoint current levels of support and resistance by identifying the high and low price on a graph, over the selected number of periods. For today’s strategy we will be using 20 periods meaning that the channels will be used to identify the 20 day high and low in price.

    Since the price of the EURJPY is trading above the 200 MVA, traders will want to identify new entries to buy the pair on a breakout towards higher highs. With our current 20 Day high identified by the Donchian Channels at 145.68 traders can set an entry to buy the EURJPY one pip above this value.
    Now, let’s look at how to enter into a sell position.

    Learn Forex – EURJPY Daily with Channels



    The process of initiating sell positions in a downtrend is exactly the opposite. Again, we will revisit the AUD/NZD Daily graph pictured below. As price is below the 200 MVA, traders will look to sell the pair in the event of price creating a new 20 Day low. Currently that low resides at .8775 and traders can look to initiate new sell positions under that value.

    Learn Forex – AUDNZD Daily with Channels




    Setting Risk & Trailing Stops

    When trading any strategy, setting stops and managing risk should be considered. When using Donchian Channels, this process can be simplified. Remember how our pricing channels (representing the 20 Day high or low), act as an area of support or resistance? In an uptrend, price is expected to move to higher highs and stay above this value. If price moves through the bottom channel, representing a new 20 Day low, traders will want to exit any long positions. Conversely in a downtrend, traders will want to place stops orders at the current 20 period high. This way, traders will exit any short positions upon the creation of a new high.

    Traders may also use the Donchian Channels as a mechanism to trail their stop. As the trend continues, traders may move their stop along with the designated channel. Trailing a stop in this manner will allow you to update the stop with the position, and lock in profit as the trend continues.


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  4. #14
    Developer igorad's Avatar
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    Hi,

    Please check out the updated UniZigZagChannel and UniZigZagSemaphore indicators for the new MT4.


    Universal ZigZag Channel-unizzsem_4-600-f.png


    Regards,
    Igor
    Attached Files Attached Files
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  5. #15
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    Hi Igorad these Zig zag indicators don't recalculate right?

  6. #16
    Administrator newdigital's Avatar
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    Quote Originally Posted by msepn77 View Post
    Hi Igorad these Zig zag indicators don't recalculate right?
    I have no idea about Igorad's zigzag but as far as I know - the latest leg of zigzag is not valid and repainting (because zigzag is the indicator to find highest/lowest peaks). Traders are using zigzag as a filter.

    if I am wrong so sorry ...
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  7. #17
    Developer igorad's Avatar
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    Quote Originally Posted by msepn77 View Post
    Hi Igorad these Zig zag indicators don't recalculate right?
    Hi msepn77,

    Could you be more concrete where is the issue?

    Regards,
    Igor

  8. #18
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    hi guys
    any idea on how to use it? any sample? any sample strategy.. i mean a description od a strategy where it can be used as a filter, or how can be used as a filter.. just a sample because i never really understood tese kind of indicators as well as the fractals

  9. #19
    Administrator newdigital's Avatar
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    Quote Originally Posted by Dave View Post
    hi guys
    any idea on how to use it? any sample? any sample strategy.. i mean a description od a strategy where it can be used as a filter, or how can be used as a filter.. just a sample because i never really understood tese kind of indicators as well as the fractals
    Hi Dave,

    I remember some old system with zigzag where zigzag is used together with the channel (high/low channel) + fractals + 'color bars' indicator. Almost all indicators are repainted but the system is good on H4 timeframe I used it for more than 1 year for example.

    If I find it in my PC today so I will upload it here.
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  10. #20
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    To Dave.

    Well. You could use it for trailing a stop for example. A bit like using fractals for trailing.

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