Thread: Zig Zag - VertexFX Indicator

Zig Zag Pointer is a powerful VertexFX client side VTL indicator that gives excellent entry and exit signals based on Fractal patterns.

A fractal High pattern is a candle whose high is greater than the Highs of adjacent candles. Likewise a fractal Low pattern is a candle whose Low is lower than the Lows of the adjacent candles. The idea behind fractal candles is that when a High is surrounded by candles with lower Highs, then there is a high probability that the market will change trend and turn bearish. Similarly, when the Low is surrounded by higher Lows, the price has stabilized and likely to stop falling. This signals a change from downtrend to uptrend.

The Zig Zag Pointer can identify these market turning points. In the first step we identify all fractal Highs and fractal Lows, from the oldest to the most recent.
In the second step, we ignore all fractal Highs that have a previous fractal High within DEPTH bars. Similarly we ignore all fractal Lows that have a previous fractal Low within the recent DEPTH bars. This eliminates signals which are repetitive and generated by sideways movements in price. In the third step, we ignore all fractals Highs that are not above the previous fractal High by at least DEVIATION_POINTS points. Similarly, we ignore all fractal Lows that are not below the previous fractal Low by at least DEVIATION_POINTS points. This ensures that only strong trends, and breakouts are considered, and weak trends which failed to cross previous Highs or Lows are ignored.
The alternate Fractal Highs and Lows is the Zig Zag Pointer indicator.

BUY - Enter BUY trade when a BUY arrow has been displayed. Do not open the BUY trade if the candle has opened with a gap-up.

SELL - Enter SELL trade when a SELL arrow has been displayed. Do not open the SELL trade if the candle has opened with a gap-down.

NOTE - It should be noted that this indicator has a lag of 1 bar after which the BUY or SELL signal is drawn.