The Z-Compass is part of a suite of four indicators called the Z-Tools Black you can buy separately in the MetaTrader Market.The Z-Compass is one of the most important indicators, because it serves as a compass in the market and is composed of the following elements
A histogram and zero line.
- The histogram is plotted with each candle and changes depending on the selected time frame.
- When the histogram is above the zero line, we say the trend or momentum is bullish and when it is below the zero line the trend or momentum is bearish.
- When in the histogram appears green bars, indicates us that the upward movement has strength, therefore keep longs and avoid taking short positions.
- When in the histogram appears red bars, indicates us that the downward movement has strength, therefore we maintain short positions, and avoid taking longs.
- When in the histogram appears gray bars, indicates us that the movement is losing strength, if It is attached by a dark green dot refers to weakness in the bullish momentum and if it is a dark red dot refers to weakness in the bearish momentum.
- Magenta color bars means that the bearish or bullish movement is extended. Not for this we must understand that the momentum has ended, but it is a sign that will have difficulty to maintain.
- Look for divergences: For instance where prices are making a series of new Lowest and the Z-Compass is failing to surpass its previous lowest.
- ZLength1 = This is the number of time periods used when calculating a moving average of SlowK and SlowD. By default is 5.
- ZLength2 = This value controls the internal smoothing of SlowK and SlowD. A value of 1 is considered a fast stochastic; a value of 3 is considered a slow stochastic. By default is 3.
- CompassFL = The Exponential Moving Average. By default is 12.
- CompassLength = The Exponential Moving Average for calculating of histogram. By default is 9.
- CompassXD = This is the number of time periods used when calculating of extreme movement. By default is 14.
- ZStochLength = This is the number of time periods used when calculating of histogram. By default is 14.
- CompasSL = The Exponential Moving Average for calculating of histogram. By default is 26.
Know all indicators Z-Tools Black suit composed of four indicators which together deliver a professional reading of the market, so we invite you to also: