ZigZag and Aroon Signals for Trend Following and Reversal Exits
Summary
The document presents a trend-following system that combines ZigZag direction with Aroon crossovers. Its listed defaults are a ZigZag depth of 5 and an Aroon lookback of 14. A long entry occurs when Aroon Up crosses above Aroon Down while the latest ZigZag point is treated as a high; a short entry uses the opposite crossover with a low. Positions are closed when Aroon crosses against them.
The accompanying settings identify a daily BTC/USDT futures backtest spanning nearly five years, but the document reports no returns, drawdowns, or comparison results. It warns that choppy markets can create frequent trades, ZigZag can delay signals, and parameter choices matter. The code defines direction using recent highs and lows, so the stated noise-filtering and adaptive qualities should be evaluated rather than assumed. No explicit stop-loss, position-sizing rule, volume confirmation, or transaction-cost analysis is supplied, leaving practical risk controls and robustness testing unresolved.
Key ideas
- ZigZag direction is paired with Aroon crossovers to filter entry signals.
- Aroon Up crossing above Aroon Down can trigger a long when the latest ZigZag point is a high.
- The inverse crossover and a ZigZag low can trigger a short.
- Aroon crossovers against an open position serve as exit signals.
- The document notes lag and choppy-market risks, and provides no backtest performance results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.