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March 6, 2014

Using Zig-Zag in trading systems

Zig-zag indicator, as well as other functions using it (Peak/Trough, PeakBars, Troughbars), inherently look into the future. As such they should not be used in trading system formulas without taking precautions. The only way to fix the ‘problem’ is to delay the signal as long as it takes for zig/zag to stabilise last ‘leg’. The delay is variable and depends how much time it takes for defined percentage change to occur in the price series since last peak/trough.

Ready-to-use solution is presented in the Traders’ Tips section of the AmiBroker members area:
http://www.amibroker.com/members/traders/11-2003.html

(NOTE: access to members’ area is limited to licensed users only, if you forgot your password use reminder at http://www.amibroker.com/login.html)

Related articles:

  1. How to restrict trading to certain hours of the day
  2. How to set individual trading rules for symbols in the same backtest
  3. Preventing exit during first N bars
  4. How generate backtest statistics from a list of historical trades stored in a file
  5. Per-symbol profit/loss in a portfolio backtest

* Filed by Tomasz Janeczko at 4:45 am under Backtest
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