Introduction to the MTF Zigzag with Three Level Indicator
Price swings are very important price points which traders should take note of. This is because these levels are areas which can act as support and resistance zones. The MTF Zigzag with Three Level Indicator helps traders identify valid price swings by improving on the classic Zigzag Indicator.
What is the MTF Zigzag with Three Level Indicator?
The MTF Zigzag with Three Level Indicator is an indicator which helps traders objectively identify and observe price action by pinpointing the swing highs and swing lows of price. It improves on the Zigzag Indicator which it is based on by identifying three levels of price action oscillations instead of just one.
This indicator automatically identifies swing highs and swing lows and labels the swing highs and swing lows with a number based on the timeframe it is based on. It plots “1” if the swing point is based on the current timeframe, “2” if the swing point is based on the 1-hour timeframe, and “3” if the swing point is based on the 4-hour timeframe.
How the MTF Zigzag with Three Level Indicator Works?
The MTF Zigzag with Three Level Indicator uses the same algorithm as the Zigzag Indicator. It detects swing highs and swing lows based on a price swing moving against a prior momentum price swing which exceeds a given percentage threshold.
This indicator however does not stop with just one level of price swing detection. Instead, it repeats the same process for the current timeframe, the 1-hour chart, and the 4-hour chart. It then labels the swing points with a number based on the timeframe in which the swing point is derived from.
How to use the MTF Zigzag with Three Level Indicator for MT4
The MTF Zigzag with Three Level Indicator has several options which can be modified within its indicator settings.
“Depth” refers to how far back in the historical data the indicator would look for price swings.
“Deviation” refers to the percentage threshold which qualifies the price swing as a valid swing point.
“Backstep” refers to the minimum number of bars in which the indicator would detect a swing high or swing low.
“GrossPeriod”, “GrossPeriod2”, and “GrossPeriod3” modifies the timeframe in which the price swings are based on. If set at zero, the indicator would detect price swings on the current timeframe. The variable used for this indicator is in minutes so users should convert the timeframe in minutes when choosing a timeframe.
Buy Trade Setup
When to Enter?
Mark a notable swing low based on the MTF Zigzag Indicator as a support zone then open a buy order if price action shows signs of a bullish reversal on the area.
When to Exit?
Close the trade as soon as price action shows signs of a bearish reversal.
Sell Trade Setup
When to Enter?
Mark a notable swing high based on the MTF Zigzag Indicator as a resistance zone then open a sell order if price action shows signs of a bearish reversal on the area.
When to Exit?
Close the trade as soon as price action shows signs of a bullish reversal.
Conclusion
The MTF Zigzag with Three Level Indicator, although not a trend direction indicator, is still a very useful technical indicator. It allows traders to objectively identify potential reversal areas based on price action, which is very useful for supply and demand traders.
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