ZigZag Trend Following with Reversal Entries and Exits

Summary

This strategy uses ZigZag turning points to track price direction. It opens a long position when a turn establishes a new high and a short position when a turn establishes a new low, then exits when the indicator reverses again. The accompanying source uses a higher-timeframe ZigZag, with weekly as the default, and places entries around persistent high and low levels. Long and short trading can be enabled separately; the published defaults enable longs and disable shorts.

The document explains the idea and lists a Bitcoin futures backtest configuration covering late 2022 to spring 2023, but it reports no performance figures. It also warns that the approach can react slowly to reversals, has no stated per-trade loss limit, and depends on one indicator. ZigZag turning points can change as prices develop, so the described entry logic should not be assumed to provide advance confirmation or stable live signals. The suggested improvements include stop losses, additional reversal filters, position sizing, and broader backtesting.

Key ideas

• The strategy uses ZigZag turning points to identify directional moves and trade in their direction.
• A new high turn triggers a long entry, while a new low turn triggers a short entry.
• Positions are closed when the ZigZag direction turns again.
• The published setup uses a weekly ZigZag timeframe and allows long and short signals to be configured separately.
• The document provides a backtest setup but no results, and notes reversal, loss-control, and single-indicator risks.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.