ZIGZAG Indicator

Is there anyone in this forum can help me with the best strategy in using zigzag indicator ?
i have loss many times using this indicator, but i think this is a powerful indicator but i just don't know how use it in the right way.
Is there anyone would help me ? Pleeaasee.........

Regards

IIN

I am not sure what you are referring to, but it may be not the Zig Zag that is the problem, but maybe it is what you put INTO the Zig Zag that is causing the confusion.

what do you mean by what i put into the zigzag that is causing the confusion. is it the parameter or anything else ?
or if we want to use zigzag, we have to combine with other indicators ?
what are the indicators ? the setting ? TF ?
or do not use the zigzag as the main indicator, but just a filter only ?

i am confuse Stan, would explain it more clearly..

BTW, thanks for your post

Regards

IIN

Dear forex experts,
do you have any idea, how to entry and exit of this chart below.
maybe you have some suggestion for me...

OMG I can't see the the candles

A quick tip (You will find out sooner or later), remove at least 2 or 3 indicators you've applied to the chart, make trading less brain-stressful

yap, i put all the indicators above the candles, just to make it easy to see the signals.
i aggre with you to remove the indis, according to you, which ones ?

thanks dexis.

Regards

IIN

ok, how about this one...



i am using DT ZZ in default setting (12), LWMA 3 low and hige as channel, BB in default setting, RSI (14), ADX (5), and MACD (4,13,1) Plus LWMA 3.

any comments and suggestions....please do....

Regards

IIN

Indicators to remove:

1. RSI
2. ADX
3. Bollinger Bands
4. The funny red and blue dots ^_^

Again, I am not pushing you to delete these indicators, but be aware the pile of visualisations you've got here is just too much

Trading must be kept simple.

One more thing. ZigZag indicator us commonly used when trading using the Elliot Wave Analysis.

One more thing before last thing:

Thanks for descriptions of the indicator settings. But here is the tricky question. If I were to ask you WHY exactly did you choose to apply a combination of these settings, would you be able to answer ?

Most profitable trading systems must have a bottomline describing why particular parameter of the indicator, oscillator or anything else is chosen (yup, including the time frame).

Give it a good thought and in the meantime I'll be waiting for your reply.

Oh, and the last thing:

Happy trading

Please follow this link to get more info about Elliot Waves. After you get a grasp of what excactly these waves do and count, ZigZag will be very convienient to use.

Please be aware that Elliot Wave is quite a thing and it takes time and effort to learn to use it properly.

http://en.wikipedia.org/wiki/Elliott_wave_principle

regards,

Dexis

From my count, you have 8 "indicators" on your screen. Are you really that concerned about optimizing only one of them? If the other 7 aren't brining you success I am not sure how you expect one more "indicator" to have a significant impact. Besides that, I can barely see the most important thing on the chart: price!

Sometimes when you fill up your chart with all sorts of derivations of price you can lose all context of what is happening in the market. I want to make a point here about too many indicators. First though, I want to say that to me, your entire "indicator" set is composed almost entirely of trend-based "indicators" and they are all going to tell you the same thing!

Trend "indcators" will work in a trending market - but only after the market starts trending. You are showing yourself nothing that the market is not already telling you via recent price history, but you are getting your information through "indicators" - which are a derivation of price. No matter, because they don't deal with the real problem very effectively, which is uncertainty.

All "indicators" do is tell you what has already happened, and perhaps (a BIG PERHAPS) offer a glimpse into what is happening right now. They're not going to tell you that the market is going to start to trend next week or in the next 10 minutes, so we should sit tight and stay out of a trade until then. Likewise, they don't tell you that a trend is going to run out of steam two days or two minutes from now so just ride this one out until then. We are constantly dealing with uncertainty in financial markets, I am convinced that all indicators do is attempt to offer us some emotional solace - uncertainty is definitely scary!

What I think you'll find if you continue to trade in the manner that it appears you are, is that you'll be making money in spite of the "indicators" on your chart, and you'll also be losing money in spite of them as well. The zig zag "indicator" is probably not going to add a new dimension to your trading, it will only further distill the information already available to you in the form of price. Honestly, have you ever exited a profitable trade and said to yourself, "Thank goodness I had Zig Zag along with MACD, LWA, BB, RSI, and ADX or I would have blown it!" Or, have you ever said, "Thank my lucky stars I was using RSI 14 along with ADX 5 in combination with BB and LWA 3 with MACD (4,13,1) instead of ADX 12 and RSI 10 together with EMA 34 and MACD (5, 13, 6)!!" Ridiculous.

You can change the "indicators" and their respective settings all you want, but price is still going to do what price is going to do regardless of what you are using. You are also going to be dealing with uncertainty no matter what.

A wise poster here once said in another thread that he uses "indicators" to goose him into trades - in other words he doesn't count on "indicators" to tell him anything about what should happen in the future because his "indicators" say so. Rather, he uses them to get him into a trade based on what MIGHT happen (uncertainty). Then, it's up to his trade managment (money management) to ensure that he does not lose more than he is comfortable with. To me, this seems far more effective than using eight "indicators" that all tell me the same thing anyway. This "might happen" strategy embraces uncertainty, it does not seek to work around it.

Lastly, and perhaps most importantly, when you use multiple "indicators" that all say the same thing, you run into what I call an overconfidence problem. When all of your trend-based "indicators" start to line up, the implication is that the market is quite obviously going to start to trend - just look at MACD/LWA/RSI!! The fact that you can look back at other trends which show a similar pattern only compounds this issue. Sooner or later, you will notice the indicators begin to line up, and the market will not trend as the lines on the chart said it should have. While you have taken a position and lost, your confidence will be blown, and the natural (incorrect) reaction to is to blame something in the "indicators" or their settings that gave you false information. In fact, you are dealing with randomness and uncertainty - there is nothing wrong with the lines on your chart. Invariably, new traders will take a loss or two and start meddling around trying to find a "better indicator combination" and tweaking their entry/exit rules and verifying their "correctness" by looking at past data to get their confidence restored before repeating the process.

In reality, by using so many similar indicators, you're seeing price through a distorted view. Further distorting the view, or distoriting it in a different way, will not help you. I think that I have to make this point, and I'll have to make it again and again, because for the longest time I thought that there was some kind of magical, golden-egg-laying-goose combination of "indicators" that would lead me to success. Somehow these fancy lines, curves, and crosses with impressive-sounding names were sure to increase my net worth many times over. All I was really doing was ignoring the fundamentals of financial markets in favor of deceptively elegant price derivatives. And I lost hordes of money in the process. Expensive education to say the least.

If you want my advice, I'd strip down your charts to only the "indicators" you find most helpful - go without any "indicators" if you feel up to it (I don't use any). Really cut out the fat. Use only the absolute essentials to get you into trades and realize that there is plenty of uncertainty that you cannot sweep away and ignore by increasing the amount of pretty lines you're looking at. You're just going to have to deal with it through sound money management.

-=DAVE=-

Super cool post, Dave.

Dexis, thank you for your kind words in the post above!

I wanted to say that I completely agree with your advice that I quoted.
We're not PhD's in finance, so there's no sense in complicating things.

Your second point is excellent. I'd be willing to bet that most traders taking entries and exits from their "indicator" selection will not be able to tell you WHY they took the trade beyond, "Well....RSI was above 50 and MACD turned up!" To me that is like answering the question "why is it warmer in summer than in winter" by saying "because it is colder in winter than in summer." Both question and answer provide the same information, but the answer reveals no new knowledge. Price and price-dervied indicators provide (essentially) the same information - and neither provides assurance of price behavior in the future (new knowledge). Both price and price-derived "indicators" can hint at what MAY happen, but as the market is always right, traders are very frequently wrong.

The WHY behind a trade is crucial, and if a trader does not understand why he or she is taking trades then that trader needs to step back and get a sense of market dynamics before proceeding any further.

Here's something else to think about. The way I trade, i.e. without "indicators", means that I need to use other methods to guide my thinking in placing trades. While I have no use for such "indicators", they are a favorite of new traders because they are very good at generalizing price data. They are very useful, in my opinion, for showing new traders how price reacts to various situations. But their usefulness only goes so far. They can be downright dangerous to use in placing trades. How can this be?

Here's my take: when we look at past data, it's easy to see how price bounced off of a 89-period EMA, or how price obeyed a lower channel line, or even how a MACD cross-over preceeded an uptrend. "Indicators" are really really good at confirming past price action. But past price action is completely absent of one key ingredient: uncertainty! As price approached the 89-period EMA, there was really no way to know that it would bouce off or ride the EMA or crash through. Likewise, a channel line isn't a cement barrier, there's nothing that says price must obey the channel. Watching a trade unfold in real-time is markedly different than zooming through reams of price history, and this is what fools most failing traders. In order to deal with uncertainty, a trader needs a predetermined plan for failure (i.e. money management). This is far more important than an entry strategy.

I began experiencing success when I solidified and held fast to EXIT rules based on money management that I determine before I even put my orders in (and I stopped paying attention to "indicators"). Frequently, I don't get in to trades until well after they've been developed - to a point that most people would call me crazy for even getting involved (the market may look overbought/oversold and ready for a correction by the time I make my play). But I know my loss limits, and once I focused on those, I started making money.

Law of averages says that traders will experience winning and losing trades at random. I am convinved the key is to maximize the AMOUNTS won and minimize the AMOUNTS lost. Not maximize the number of winning trades and minimize the number of losing trades. This would be nice to be able to do, but we cannot know what the outcome of a trade will be when we enter it. We only know how much we have won or how much we have lost. Period.

-=DAVE=-

Creating a trading strategy based on Zig Zag indicator is useless (in my opinion). The Zig Zag indicator only shows You what price has been doing in the past, problem is that the last segment of the ZZ will change as price changes, so You never actually know where's the ZZ, You can only know where the previous ZZ segment was. I'm not the biggest fan of the Elliot wave theory but I understand that ZZ could help You on counting the waves sequence (as Dexis said), but if You try to create a trading strategy based on ZZ only then You're already doomed.

Just my opinion.

This is the response {in another forum} to a request to program
"Zig Zag" indicator for another platform. I believe you are talking of the same one.
Quote
I think that's because the last leg of the zigzag is dynamic and constantly changing. It only looks "good" (correct) on the chart after the fact -- not during the move since it's constantly revising itself.

Regards,
Chris
End Quote
In otherwords it is, a RE-Painter and therfore, useless in the Real World.
Ziggy is the First Indicator you shoud Start to turn to Dust in your setup.

btw. please do not doubt Chris' credibility. He publishes Indicators for free in a popular Trading Mag. {i guess you May have to buy the Mag?}
hth. & GL

{Ziggy Played GuitarEx }

i interest in this zigzag, cause of one thread in other forum, but it's not in english language. It's in malaysian language, cause i'm from indonesia i can understand it.
in that thread there are some traders which have good experiences about zigzag, even one of them today show me the result of his trade have no loss, just using only zigzag. althought the TP just 10 pips. This is similar to be like scalping. but i guess it's not important, as long as that's a profitable trade not a loss trade, isn't it ?
one of the other trader suggest me not using this zigzag alone but combining it with BB in default setting, MACD in default setting and RSI in default setting with TF 4 hour above.
other trader suggest me to combine it with MA and MACD.
But i use MACD not in default setting, cause in my opinion with (4,13,1) is more accurate than i add LWMA 3 to get the MACD crossing signal.
i am using ADX to see the market whether it's in whipsaw or not, and i use 5 setting, it's more accurate for me than default setting.
the funny dots are the part of the DT ZZ, i don't use the original zigzag from metaquotes.
i am using LWMA 3 low and high as channel, to make it easy to see where the price will go by the angle of the channel.
TF 15 i choose cause TF 30 above seems too long for me. i prefer 1M, 5M, and 15M. but in 1 and 5 minutes there are many short zigzag legs.

i guess that's my reply to you dexis, thanks

IIN

yup, i agree with you this zigzag is suitable for the elliot wave. and i was a member in EWI too. but i unsubscibed a week ago. cause in my opinion elliot wave is better to use in longer TF. but i prefer shorter TF. but thanks for the link Dexis.

Regards

IIN

Thanks Dave, you spent your time to give me good advices. So that i have to be more carefull in trading. i really mean this .

would you explain the way you trade beside using money management.
don't you use any indicators ? how do you enter and exit ?

Thanks

IIN

yup, i agree with your opinion. i've alredy doomed before read the thread about this zigzag in other forum. Cause this zigzag is a wild indicator so that i think it can't stand alone.

The purpose i start this thread maybe there is a guy in this forum who have good experiences and have benefit in using zigzag want to share it with us.
although it's just making small pips or it seems like scalping.

i have been invited the guy who start the thread from that forum to this thread in discussing the way he trade by using zigzag. But i don't know he will or not. Cause it seems like he's very busy. But today he have post the result of his trading. all of them are profit, although just 10 pips per trade.

Regards

IIN

Yes, off course i don't doubt Chris credibility and reputation. I have loss experinces in using zigzag too. but maybe in this forum we can find some benefit of using zigzag........
beside using it for elliot wave and fibonacci..

Regards

IIN

Try to think outside the box, you might just stumble upon an idea to the extent it looks unbelievable but makes some serious money.

I'll put some time to study the zig-zag and how to apply it to trading without implementing EW's, maybe some cool TS will pop-out ^_^

Basically, don't try to hunt and test every possible TS out there. Instead, try to create your own. It will give you much more confidence. It's like having your own personalised car, tea cup, cellular, watch or whatever, it makes you special even if no one knows about it