DT ZigZag ATR Indicator

The DT ZigZag ATR Indicator combines the ZigZag indicator and the Average True Range (ATR) to assess price trend direction. In the event of a bullish trend, the indicator will display a succession of red dots below the price. The DT ZigZag ATR Indicator prints a succession of blue dots above price to indicate a bearish market phase.

What is the DT ZigZag ATR Indicator?

The DT ZigZag indicator works in tandem with the Average True Range indicator’s computation. The ZigZag indicator’s goal is to show you the important turning points that represent the underlying directional price movements by forming ZigZags with lines. The Average True Range indicator is a price range indicator that can visually display and tell what the market is doing in terms of price changes. In one sense, it is continually monitoring volatility levels because the ATR and volatility have a direct proportionality relationship. That instance, when the ATR number is high, the volatility is likely to be high as well.

Setting up the DT ZigZag ATR Indicator
Setting up the DT ZigZag ATR Indicator

DT ZigZag ATR Strategy

When the dots are red, it simply indicates that the market is in a bullish zone. For bullish sectors, the red dots are frequently located below the price action. You may, however, modify the color of these dots to practically any color you like. When the dots are blue, it indicates that the market is in a negative zone. For bearish sectors, blue dots can be spotted above the price activity. However, you may modify the color of these dots to whatever you choose. If you have a light background, you could use darkish colors, and if you have a dark background, you could use light colors so that the indicator may be seen clearly.

Inspection can quickly notice increased levels of volatility or unexpected spikes in volatility. Close inspection reveals that the distance between the dots and the body of the candlesticks varies. When the space between the dots and the body of the candlestick is greater than usual, it indicates that market activity is volatile. This is common during breakout and trending periods. When the space between the dots and the body of the candlesticks is lower than normal, the market is in a peaceful period, which is frequently associated with low volatility.

Buy Signal

The following could be your checklist for a buy trade:

  • When the trend of the asset is bullish.
  • When red dots appear below the candlesticks.

Once these events occur:

  • You could open a buy position after you confirm your entry with bullish candlestick patterns.
  • You could set your stop loss just below the nearest swing low.
  • You could set your take profit at the nearest resistance zone, or you could exit trade when blue dots appear above the candlesticks.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
DT ZigZag ATR Indicator Buy Setup
DT ZigZag ATR Indicator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the trend of the asset is bearish.
  • When blue dots appear above the candlesticks.

Once these events occur:

  • You could open a sell position after you confirm your entry with bearish candlestick patterns.
  • You could set your stop loss just above the nearest swing high.
  • You could set your take profit at the nearest support zone, or you could exit trade when red dots appear below the candlesticks.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
DT ZigZag ATR Indicator Sell Setup
DT ZigZag ATR Indicator Sell Setup

DT ZigZag ATR Pros & Cons

Pros

  • The DT ZigZag ATR Indicator helps the trader predict the trend direction of the market.
  • This indicator helps suggest possible support and resistance levels on the chart.

Cons

  • The DT ZigZag ATR Indicator may not be very suitable for narrow-ranging markets on smaller timeframes.
  • When using this indicator, other technical factors including candlestick patterns and price level analysis ought to be considered in order to predict a suitable trade setting.

Conclusion

This indicator has a versatile nature. That is, we can use it for a variety of purposes. One of the more obvious applications is determining trend direction. The position or color of the indicator’s dots might indicate the trend direction. When blue dots appear above the price action, the market is in a downtrend; when red dots appear below the price movement, the market is in an uptrend. That’s all there is to it in terms of trend-direction detection. If you want to take it a step further, such as using this indicator to generate signals, you can trade the color changes as mentioned. However, you may want to do so on a longer timeframe. Note that this indicator do not guarantee profits.

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