Discussion of article "The power of ZigZag (part I). Developing the base class of the indicator"
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New article The power of ZigZag (part I). Developing the base class of the indicator has been published:
Many researchers do not pay enough attention to determining the price behavior. At the same time, complex methods are used, which very often are simply “black boxes”, such as machine learning or neural networks. The most important question arising in that case is what data to submit for training a particular model.
Generally, ZigZag type indicators are built based on bars' highs and lows with no spread consideration. This article presents a modified version, in which a spread is considered when constructing segments for lower ZigZag extreme points. It is assumed that deals are to be performed inside the price channel in the trading system. This is important since it often happens that the buy price (ask) is significantly higher than the sell one (bid). For example, this may happen at night time. So it would be wrong to build an indicator only based on bid prices. After all, it makes no sense to build the lower extreme points of the indicator based on bar lows if there is no possibility to buy at these prices. Of course, the spread can be taken into account in trading conditions, but it is better when everything is immediately visible on the chart. This simplifies the development of the trading strategy, since everything is more plausible initially.
In addition, you may also want to see all the points the ZigZag extreme values were updated at. In this case, the picture becomes even more complete. Now let's consider the indicator code. We will dwell only on the basic features and functions.
Author: Anatoli Kazharski