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Igor sent me the following message but unfortunately my reply was sent back
by pandora.be.
So I repeat my reply here, expecting him and anyone else interested to read
it.
Igor wrote:
Hello,
With great interest I read your mail...and I always wonna to do
something with the zigzag indicator...but like you're saying the last
leg is dynamic etc etc....so maybe your formula could give some
solution....But how do I have to interpret your indicator I don't find a
logic pattern in it.
Could you give me some more help please...thank you very much...
igor
My reply is this:
Igor,
my indicator is no more than what its name declares. It was not written to
be used as a stand-alone indicator but on the purpose of watching zig zag's
behavior and measure its validity. So, a simple answer to your question
would be: "Use Metastock's zig zag the way you would, but please have an eye
on my indicator so that you will know at a glance if zig zag is trusty or
not. In other words, DO NOT trust zig during those periods that my indicator
reads zero." That could be all there is to it.
As you see, the question now is "how can one use zig zag in the first place"
and not "how can one use ZigZag validity" because the second question has
already been answered.
If you are not familiar with zig zag, I suggest you have a look at Metastock
's on-line help, if you haven't already done so. What I can say here, is
that you should think of zig zag as a "major movements catcher" dedicated to
the study of trends in prices (unfortunately, more suitable for past trends,
less suitable for present ones and only partly, if at all, for future ones).
My indicator attempts neither to solve zig's late response problems, nor to
add directly new possible uses to its own. No one will ever be sure that
yesterday's swing point is really the start of a new trend, no matter what
indicators one uses! If that were possible, then zig zag would be really
the most valuable indicator ever made. In fact it would be what we (traders
and analysts) call "the holly grail". Very sorry to say it is not.
What's even worse, hundreds of unsuspecting trading software users, have in
the past been victims of zig's last leg's misleading change of direction,
and some of them have even lose their money investing in the "new trend".
So, please be very careful when you use zig zag, and functions based on it
like peak() and trough() )!
The good news (associated with my ZigZag validity) is that now, one can be
sure that when my indicator reads 1 (one) this means that zig's direction
(the trend) is well established and Metastock will not revise its direction
at any time in the future! Well, it will probably adapt the last leg's
slope, but never its upwards or downwards direction.
Furthermore, now you can use zig (always as a pair with ZigZag validity) in
numerous studies (formulas, explorations and experts), because from now on
you will have no doubt that once my indicator has the value of 1, zig
indicates the right direction. What you only have to do in all those
studies, is to add a condition like the following:
ZigValid:= fml("ZigZag validity") = 1;
And then ..
If(ZigVal and and zigCondition and myCondition1 and ..myConditionN,
doSomething, doSomethingElse)
I hope that all the above help.
Anyhow, I was asked to write an article about my indicator for a newsletter.
So, maybe I will include some more examples there. When I send it and after
its publication, I will let the user group know.
If you have any more questions about ZigZag validity I will be glad to
assist you.
Spyros (SR)
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