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Hello JO,
Many thanks for your reply.
I take your point about the unreliability of Zigzag confirmed by the
interesting link to the Spyros Raft article.
Identifying divergence as it is occurring is, of course, one of the great
TA challenges. The irony is that it only becomes obvious in hindsight when
it is of no longer of any value. Therefore, in my opinion, Peak and Trough
(if they behave as described) are as good as anything else provided you are
prepared for them to be incorrect 50% of the time!
I actually want to use them on my indicators rather than on the price
itself where the volatility will be much lower (as you describe using
mutuals as an example). My question really pertains to the actual
relationship of Peak/Trough to Zigzag. Whatever the validity of the
indicators, once they have been frozen in the past, it should surely be
possible to run a backtest on them using the System Tester. My problem is
that there doesn't seem to be a correlation between Peak/Trough and Zigzag
despite the fact that the MS manual states that there is.
Regards,
Kevin
At 18:09 07/10/2003 +0000, you wrote:
Yeah, you're missing a big something. Read this text.
http://trader.online.pl/MSZ/e-w-ZigZag_Validity.html
You really can't use Peak and Trough or zigzag in explorations. Even
if you validate it, it doesn't work too well. I've found that Peak
and Trough work better on slow moving prices like those of mutual
funds and when the peak and trough is not applied to prices. Example
TroughBars(1,MACD(),28)=1
This tells you when the MACD passes through a trough. On a slow
moving stock this works, but on a volatile stock--forget it.
You'll have to find an alternative to using the P & T in explorations
and Systems Testing.
JO
--- In Metastockusers@xxxxxxxxxxxxxxx, Kevin <kevin_barry@xxxx> wrote:
> Hello,
>
> I've been gazing at this for so long that I'm not seeing it anymore.
>
> I am creating a divergence exploration. In order to ensure that my
signals
> will work as intended, I plot the indicator(s) on a chart and run a
system
> test which contains the syntax that I will later use in my
exploration.
> Usually, entry signals are generated where my chosen indicator
values
> converge which is what I would expect.
>
> I wish to use the Peak function which, as the manual states, uses
the
> Zigzag function.
>
> So, I have plotted the Zigzag indicator on my chart with the
following
> properties: Price field: High; Reversal amount: 5; Method: percent.
>
> In the System Tester, I say enter short when Peak(1,H,5) > Peak
(2,H,5). I
> am using no other parameters and I have set an exit that takes me
out a few
> bars later.
>
> When I run the System Test, the entry symbols appear seemingly at
random,
> certainly nowhere near the Zigzag tops which is what I would have
expected.
>
> Am I missing something here?
>
> Any help appreciated.
>
> Regards,
> Kevin
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