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Zigzag Trading Strategy | How to Trade With the Zigzag Indicator | Intraday Trading - YouTube
Channel: Power of Trading
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how to trade with a zigzag indicator the聽
zigzag swing trading strategy presented聽聽
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requires the use of one particular indicator聽
the fibonacci extension indicator will be used聽聽
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to additionally confirm the abcd pattern it聽
will be used for trade management as well聽聽
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now before we go any further we always聽
recommend taking a piece of paper and a pen聽聽
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note down the rules of this entry method for聽
this video we're going to look at the buy side聽聽
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step number one set the zigzag indicator settings聽
at 20 for the depth and 5 deviation first we want聽聽
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to make sure the zigzag tool will only show聽
the more significant swing high and swing low聽聽
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points in the market for this we have to use at聽
least 20 periods for the depth and 5 deviation聽聽
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to accurately display the market swings now聽
we're all set to conquer the market swing waves聽聽
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step number two plot the fibonacci extension line聽
once the first two swing waves are established聽聽
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in order to plot the fibonacci extension line聽
we need three points of reference as soon as聽聽
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the first two waves of the zigzag pattern are聽
developed we're offered three swing levels聽聽
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we're going to use them to draw the fibonacci聽
extension levels the reason why we use the fib聽聽
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extension levels is to try to anticipate where the聽
last swing wave of the zigzag pattern will form聽聽
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the zigzag indicator will only mark the swing low聽
as being formed too late for us to rely and base聽聽
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our trades alone on this indicator this is the聽
main reason we employ different trade tactics聽聽
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the tactics are used to anticipate where it's聽
more likely for the zigzag pattern to end step聽聽
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number three wait for the third wave to terminate聽
between 0.618 to 0.786 or between 1.0 to 1.272聽聽
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the reality is that market symmetry doesn't happen聽
often the ab equals cd pattern requires a lot of聽聽
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precision in order to have all the conditions聽
for this pattern to be valid throughout our聽聽
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back testing software we have found out that the聽
third wave of the zigzag pattern ends between聽聽
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0.618 to 0.786 or 1.0 to 1.272 since we can't know聽
for sure where the third wave will end we're going聽聽
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to employ one of our favorite trade techniques to聽
spot a swing point in the market step number four聽聽
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wait until you have a candle with a higher low on聽
the right in the left the bar from the right needs聽聽
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to break above the bar on the left the three bar聽
pattern to spot a market swing point is quite easy聽聽
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all you need to do is to wait until you have a聽
candle that has a higher low on both the left聽聽
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and the right side of it in order for this three聽
bar pattern to be confirmed we also need the bar聽聽
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from the right to break above the high of the bar聽
from the left to better understand how to spot聽聽
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when a swing low is about to be put in place聽
we've made a simple illustration c figure聽聽
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now you need for this pattern to develop between聽
0.618 to 0.786 or between 1.0 to 1.272 the zigzag聽聽
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strategy satisfies all the trading conditions聽
which means that we can move forward and outline聽聽
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step number five zigzag trading strategy buy at聽
the close of the three bar pattern after the three聽聽
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bar pattern is completed we don't want to lose聽
any more time and we go by at the market note聽聽
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we use the three bar pattern to anticipate swing聽
market points with all of our trading strategies聽聽
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this brings us to the next important thing that聽
we need to establish for the best zigzag strategy聽聽
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which is where to place our protective stop聽
loss step number six hide your protective聽聽
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stop loss below the three bar pattern the stop聽
loss is going to go below the three bar pattern聽聽
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your stop loss may be a little bit bigger聽
depending on the time frame you're trading聽聽
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you want to make sure that the three bar pattern聽
where your stop loss goes maintains at least a two聽聽
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percent risk you don't want to risk more than聽
two percent of your account in any given trade聽聽
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last but not least we also need聽
to define where we take profits聽聽
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step number seven take profit equal two聽
or three times more than the stop loss聽聽
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now where's our profit target going the classical聽
abcd pattern essentially keeps you at a one to one聽聽
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risk reward ratio also a lot of the time with the聽
abcd pattern you'll see it pretty frequently that聽聽
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those targets areas are front runned however when聽
you trade with the zigzag indicator you're able聽聽
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to capture two or even three times more the risk聽
taken note the above was an example of a buy trade聽聽
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using our zigzag trading system use the same rules聽
for a cell trade but in reverse in the figure you聽聽
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can see an actual sell trade example conclusion聽
we hope you enjoyed this step-by-step guide on聽聽
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how to use the zigzag indicator to time your聽
entry and identify the market swing points聽聽
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the idea behind this simple strategy is聽
to have a better assessment of the trend聽聽
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so you can make better trading decisions you聽
can also watch our winning news trading strategy聽聽
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with the zigzag trading strategy you'll be able聽
to hold on to your winning trades and you'll聽聽
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avoid the urge to liquidate your position on any聽
minor pullbacks which are ordinary in the market聽聽
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thank you for watching please leave a comment聽
below if you have any questions about how to聽聽
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trade with zigzag indicator also please give聽
this strategy a one like if you enjoyed it
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you
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