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The High-low zigzag In Figure 1 you see an example of a zigzag between the lowest low and highest high levels at the turning points. The minimum change required in this example is the sum of a 3% price change and a three-period ATR multiplied by a factor of 1.5. I call this zigzag indicator "SVEHLZZperc" and use NinjaTrader's NinjaScript to implement it.
To profit from price volatility in the zigzag, I use J. Welles Wilder's ATR to create a volatility factor based on a lookback period and multiplication factor. You can draw the zigzag on a fixed high-low percentage swing, or on the ATR volatility, or on a combination of percentage swings and price volatility. The HLPivot parameter is influenced by either the zigzag percentage used, or by the ATR period and factor, or by both the percent and ATR settings. If the ATR factor is set to zero, then the percent setting will be taken into account. If the zigzag percent is set to zero, the volatility setting will be used.
A full description can be found in the Stocks & Commodities June 2013 publication.
Download the basic NinjaScript formula SVEHLZZperc: SVEHLZZPerc
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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