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Originally Posted by asliok
Can you explain how to use this indicator? When we should buy and sell? Actually i didn't understand. Thanks.
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Usually zigzag is using as a filter.
But zigzag is not simpe indicator.
You may read it here:
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Interpretation
The Zig Zag indicator is used primarily to help you
see changes by punctuating the most significant reversals.
It is very important to understand that the last "leg"
displayed in a Zig Zag chart can change based on
changes in the underlying plot (e.g., prices). This is
the only indicator in this book where a change in the
security's price can change a previous value of the indicator.
Since the Zig Zag indicator can adjust its values based on
subsequent changes in the underlying plot, it has perfect
hindsight into what prices have done. Please don't try
to create a trading system based on the
Zig Zag indicator--its hindsight is much better than
its foresight!
In addition to identifying significant prices reversals,
the Zig Zag indicator is also useful when doing Elliot Wave counts.
For additional information on the Zig Zag indicator,
refer to Filtered Waves by Arthur Merrill.
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and:
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Elliott Wave Theory
The Elliott Wave Theory is named after Ralph Nelson Elliott. Inspired by the Dow Theory and by observations found throughout nature, Elliott concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves. In fact, Elliott believed that all of man's activities, not just the stock market, were influenced by these identifiable series of waves.
With the help of C. J. Collins, Elliott's ideas received the attention of Wall Street in a series of articles published in Financial World magazine in 1939. During the 1950s and 1960s (after Elliott's passing), his work was advanced by Hamilton Bolton. In 1960, Bolton wrote Elliott Wave Principle--A Critical Appraisal. This was the first significant work since Elliott's passing. In 1978, Robert Prechter and A. J. Frost collaborated to write the book Elliott Wave Principle.
Interpretation
The underlying forces behind the Elliott Wave Theory
are of building up and tearing down. The basic
concepts of the Elliott Wave Theory are listed below.
Action is followed by reaction.
There are five waves in the direction of the main trend
followed by three corrective waves (a "5-3" move).
A 5-3 move completes a cycle. This 5-3 move then
becomes two subdivisions of the next higher 5-3 wave.
The underlying 5-3 pattern remains constant, though
the time span of each may vary.
The basic pattern is made up of eight waves
(five up and three down) which are labeled 1, 2, 3, 4, 5, a, b,
and c on the following chart.
Waves 1, 3, and 5 are called impulse waves.
Waves 2 and 4 are called corrective waves.
Waves a, b, and c correct the main trend made by waves 1 through 5.
The main trend is established by waves 1 through 5
and can be either up or down. Waves a, b, and c
always move in the opposite direction of waves 1 through 5.
Elliott Wave Theory holds that each wave within
a wave count contains a complete 5-3 wave count
of a smaller cycle. The longest wave count is called
the Grand Supercycle. Grand Supercycle waves are
comprised of Supercycles, and Supercycles are comprised
of Cycles. This process continues into Primary,
Intermediate, Minute, Minuette, and Sub-minuette waves.
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The better way to see about how to use zigzag is the following:
- the channel trading system here
Channel trading system (read this thread from the beginning for explanation about how to use zigzag).
- Elliott and patterns: see
this post and
check Harmonic section for more advanced zigzag.
To say a true Harmonic people understand more about zigzag.
As to me so I used zigzag in more simple way in Channel trading system: when I am losing money in manual trading so I start to trade channel trading system to recover deposit size
Channel trading system
02-26-2007, 11:26 AM
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