Zig zag is one the best indicator to be
used because in can determine the lowest and highest price that will be formed by a certain
currency pair. This indicator can help you identify the situation of the lowest market and the highest that
will be achieved if you apply the usage together with Fibonacci Retracement because you can
determine the direction of price easily and clearly at every fibo line. However in this
chapter I would like to explain clearly the usage of zigzag indicator, not the usage of Fibonacci
Retracement. In the forum also explain the usage of this indicator. The graph below is formed
when zigzag application is apllied.
HOW TO USE
Zigzag indicator can help you to make
decision when entering position and you can also know the market whether is OVERBOUGHT or
OVERSOLD. But you cannot depend only on this indicator without referring to other
indicators. Make this indicator as the basic to determine the market highest and lowest only. Never
use it as and indicator to determine the main entering position. You must apply the basic
technique together with other indicator that will be explained in the next chapter. I will explain how
to use this method the best way as shown in the graph below:
Open Sell
In order to open SELL position, you
need to refer to the final and highest price touched by zigzag.
- Make sure zigzag line is formed at
the highest price before opening SELL position.
- Pay attention by looking at the
shape of candlestick bullish formed at highest price zigzag.
- When bullish candlestick is
transformed into bearish candlestick, you must open SELL position and
make sure the highest price zigzag is formed at a higher point than
the previous zigzag or at least the same price. Please refer to the
graph.
- Never enter SELL position in the
middle of a trend.
- If you already open SELL position
you can takeprofit when the currency pair reduces to 50% from the
previous bullish trend.
Open Buy
- To open BUY position, you must refer
to the final and lowest price touched by zigzag.
- Make sure the zigzag line is formed
at the lowest price before opening BUY position.
- Pay attention by looking at the
shape of bearish candlestick formed at the lowest price zigzag.
- When the change happen to the shape
of bearish candlestick to bullish candlestick, you can open
BUY position and make sure the lowest
zigzag price formed lower than the previous zigzag price or the same.
Please refer to the graph.
- Never enter BUY position in the
middle of a trend.
- When you open BUY position, you can
take profit when the currency pair go up to 50% from the previous bullish trend.
Precautions
Zig zag
has advantages and disadvantages. In order to avoid problem, I
strongly recommend that you never use this indicator alone. You can
use it with other indicators explained earlier to make you trading
more effective. If you are not fluent with this indicator, you might
make a mistake like I’ve shown in the graph. Sometimes we can see
that a trend might change by the change of candlestick’s shape but
it is actually SIDEWAY as shown in the graph. This is a problem to
investors if they use this indicator without referring to other
indicators because it has been misread. Therefore I strongly
recommend that you combine this indicator with other indicators such
as Stochastic, RSI14, RSI3 and MACD. You are advised to use Zigzag at
bigger TIMEFRAME such as H1, H4, D1, W1 and MN to avoid problems.
Here I listed the advantages and disadvantages and the best technique
to maximize the usage of this indicator:
Enter SELL position after the highest price zigzag is formed
and make sure there’s a change in bullish candlestick to bearish
and make sure he highest price formed is more or equals to the
previous highest price.
Enter
Buy position after the lowest price zigzag is formed and make
sure there’s a change in bearish candlestick to bullish and make
sure the lowest price formed is more or equal to the previous lowest
price.
Take
profit after you feel that SELL or BUY position has reached previous
50% lowest or highest.
Never enter SELL or BUY position in the middle of the market because
at this stage there is possibly a sudden change in trend. Never
depend on zigzag alone without taking other indicators into account.
Make sure you refer to all TIMEFRAME to avoid mistake when entering
trend. Begin from bigger TIMEFRAME to smaller. For example MN, W1,
D1, H4, H1, M30, M15, M5 & M1.
The
best TIMEFRAME are W1, D1, H4 and H1. Lastly be confident with the
position that you have entered by being relaxed. Follow and trust the
indicators that you are using.
Post a Comment