The purpose of the “Zigzag Strategy” is to identify, using indicators, cases where the previous peak or trough has been broken out, and take advantage of the momentum that is created following the break out.
This strategy is a momentum strategy, particularity suitable for short one hour charts.
The currency pairs most recommended to use this Zigzag strategy are GBP/USD and GBP/JPY.
Indicators used for this strategy is “Zigzag” and “Commodity Channel Index”.
Signal of Buy and Sell Orders
Enter of the Buy(long) position, when break of previous Zigzag peak is occurred, and simultaneously, a CCI value of over 100 is received.
Enter a short position, when the last Zigzag trough is breached, and a CCI indicator value is lower than 100.
The trade entry rate will be a breakout of one pip from the most extreme rate reached within the Zigzag.
Setting up Take Profit and Stop Loss
The position should be divided into three parts, with each of these having a different exit target.
Upon reaching each target, we will realize a third of the position amount.
- The first target will be placed at a distance of 25 pips from the entry rate.
- The second realization target will be placed at a distance of 60 pips from the entry rate.
- The third target will be placed at a distance of 100 pips from the entry rate.
- The stop loss should be placed at a distance of 50 pips from the entry rate.