With regard to a recent bloodhound webinar on the use of zigzag, it is perhaps noteworthy that for scalping the zigzag indicator legs should be placed on the closing prices. Only the last leg should always be updating over each tick of the last bar in development. This is different from what happens to the zigzag indicators offered as standards by many trading platforms (NT included). All these standard zigzags lag a few bars and therefore they are useless, as it was evident during the webinar exercise.
One strategy applied with the zigzag can be based on trend following. It is best applied after a significant low or high, it provides a:
1. long entry signal when there is a higher high next to a higher low;
2. short entry signal when there is a lower low next to a lower high;
alternatively one could use/overlap two zigzags in parallel set with different timeframes (for ex, referring to the DAX, slow zig 0.2%, fast zig 0.075%, or 25 ticks and 10 ticks, and so on ) and therefore in this case one could apply the following:
1. long entry signal when longer term zigzag is trending up and when short term zigzag marks a higher high next to a higher low;
2. short entry signal when longer term zigzag is trending down and when short term zigzag marks a lower low next to a lower high;
Then one could optimize this system by type of instrument, and by other independent variables like:
Zigzag settings (long term and short term),
type of instrument (DAX, ES, 6E, YM, ),
timeframe,
stop loss strategy;
confluence with another parallel zigzag applied to an oscillator, for example RSI
timing (which hours of the trading days, which days, which news releases) ;
go long only when supertrend (10;3) is up,
go short only when supertrend is down;
long only when a given moving average has crossed above the ichimoku cloud;
short only when mov.-avg has crossed below the ichimoku cloud,
ect
Maybe a bloodhound user, or bloodhound itself through a webinar, could share/show an example implementing this different type of zigzag?
thanks.