Where the Opportunities Exist

To exit you can use smaller periods to determine the ending trend

I don't think so , but thank for your opinion

Cool... I'm back trading...and I get it now

The zigzags function like a second pip donchian (16pip imposed on a 42 pip, the major one)... repainting was never an issue

So ...

16 pip channel above the 42 pip channel middle line = Trend is up
16 pip channel below the 42 pip channel middle line = Trend is down

The implications are huge and the potential to inovate too

Regards and Thanks Neio

Someone asked...I post an example (I am not saying that is the way Neio trades but it is inspired by him, among others)...

If you look at the picture the zig zag is aligned with the darker channel (the zig zag settings are the same). When the channel crosses in its entirety the brighter one (see red vertical line) I enter because there is significant momentum (this one is inspired by Laura's Roadmap thread).


If you take the zig zag and trade with only the channel it is the same thing...

Any other ideas are welcome

Swnlobo

Hi all, I'm a little late here.
By the way, thanks Neio for sharing.

I quoted the most significant sentence in my opinion.
I am still trying to find the right time and avoid ranges.
Probably a momentum indicator could help but lagging is the problem. How could I measure the force?

Regards,
Carlo

This is an interesting concept, once in a while I come back to study it in order to see if finally I can de-cypher it. I think I'm close enough.

What's the purpose of this indicator?
I found that this indicator is basically an average 4H candle plotted inside a 1M chart, the interesting part is that this hypothetical candle will never end because it's following price, thus we can always see current price vs. this "candle".

In other words we have a continuous comparison between the current price and the average movement price will do in a 4H session. This can be useful in may ways,


Why default parameters are 0.0042 and 0.001?
As announced before, this has to do with average size of a 4H candle. In order to prove this hypothesis I'm going to calculate the average H4 candle size on GBPUSD, from high to low, first I'll refer to data of 2015 for the sake of reproducing what Neio probably observed, then I'll refer to actual data and thus finding optimized parameters to recent years.

Regarding all 2015 H4 candles we have that:

1. Average candle size: 0.0045
2. Average wick size: 0.0023
3. Average body size: 0.0022

As you can see, given a little tolerance, parameter are very close to what Neio found out. For those who didn't get the implication of this, here's a visual representation of what I'm meaning:

As you can see the indicator allow us to view the development of an H4 session inside a 1m time-frame. The parameters that would be good today, based on average H4 candles size from Sept 2021 to Sept 2022, would be actually the same (even if average candle size is decreased to 0.004).

What about the zig-zag indicator?
Actually this is where I struggled the most, but at the end I found an answer to what's the purpose of it and why it's not a standard zig-zag indicator, in fact this one will not paint based on fractals but only on price movement (same as the main indicator). Here's what I found:

As you may know zig-zag does repaint and if you want to see the history of the path of zig-zag you can actually use the main indicator with the same parameter as zig zag. Can you see from the image that when the channel change direction then zig-zag is painting on the last increment?
Basically this zig-zag is a secondary channel with more fast parameters (m30/H1 average candle size), it allow us to not loose focus on the main channel because it's the main channel that carries more weight given the fact that it's considering larger movements.

So we can basically say that using the original template by Neio and using 2 channels without zig-zag is the same thing. Actually I prefer using two channels because with zig-zag I have to refresh the chart once in a while.


What's the implication of all this?
Well, I found that, considering the main channel, going long at the lowest line and going short at the same line gives the same chances of winning and potential profit.

1. Going short when price cross downward the lowest line imply that current H4 candle body size is above the average, hence there's certainly more force behind the movement compared to an hypothetical cross at the mid-line, we can take advantage of that by selling.
   
   Trends on higher time-frames appear as candle with big bodies and small wicks.
   
   
2. Going long when price cross upward the lowest line imply that current H4 candle wick size is above the average, or that H4 body size went temporary above the average but there wasn't enough force to sustain that movement hence price will come back with the chance of having an H4 candle with bigger wick size and lower body size.
   
   Ranges, trend ends and swings on higher time-frames appear as candle with high wicks size relative to their body.

So we can conclude this is only a framework, from there we can build a system that take advantage of trends or a system that takes advantage of ranges. Actually the opportunities lies everywhere but at the middle, on that situation we can't really know if price will explode or if it will stay there.
In order to build a valid system on this framework we surely need some type of filters that keep us away from trading ranges when we are in a trend, or trading trends when we are in a range.

This is where my work stop, I tried many things but with little success on filtering bad signals. I think I've shared some good intuitions hoping someone will find them useful. Despite I'm always working on other things I would really like to complete this project so if someone want to contribute on here and maybe sharing some insights on how to apply correctly some filters it would be a great learning experience for me and everyone else.

[quote=apprendista;14142875]As you may know zig-zag does repaint and if you want to see the history of the path of zig-zag you can actually use the main indicator with the same parameter as zig zag. Can you see from the image that when the channel change direction then zig-zag is painting on the last increment? Basically this zig-zag is a secondary channel with more fast parameters (m30/H1 average candle size), it allow us to not loose focus on the main channel because it's the main channel that carries more weight given the fact that it's considering larger movements./quote]

According to the rules of fractal scaling/Brownian motion, the ZZ represents average 30 minute moves, not H1 42/16 approx. sqrt(8); 8 * 30 = 240.