The Zerolag Oscillator is a MACD type momentum oscillator, based on two zerolagging moving averages. The raw oscillator is smoothed several times, before a histogram is calculated. The histogram is then smoothed again and normalized over twice the lookback period of the oscillator. You may register for FREE trial anytime.
Indicator Description
The design of the Zerolag Oscillator follows two main ideas:
- Establish the current trend
- Identify low risk, high reward trade setups
When the histogram is above the zeroline, the histogram bars are plotted in lime or green color. These colors represent an uptrend. An uptrend favors long setups. When the histogram is below the zeroline, the histogram bars are plotted in red or salmon color. These colors represent a downtrend. A downtrend favors short setups. The oscillator uses a particularly long lookback period (default setting 144 bars) to display the current trend. This makes it easier to find valid trade setups.
Two calculation methods are available for determining the trend:
- The Kaufman Efficiency Ratio
- The SuperTrend
The Zerolag Oscillator is designed for locating momentum and pullback entries. Momentum entries are found shortly after a trend change, whereas retracement entries focus on the middle chunk of a larger trend. There are two types of retracement signals: Key Retracements and Secondary Retracements.
Finding the Sweet Spot
Retracement entries attempts to locate a sweet spot, where a new position can be built and held during the major part of the trend. It should have the following characteristics:
- New trend, but not yet matured
- Challenge by an adverse price move
- Trend resumes after the challenge
This is what can be considered a sweet spot. A young trend has just established itself. Market participants will align themselves with the momentum while traders on the wrong side will close out their positions.
We recommend applying additional price benchmarks as as filters for the Zerolag Oscillator. Tests show that support and resistance indicators, such as VWAPs, Pivot Levels and the Opening Range can be combined with the Zerolag Oscillator to improve probabilities. Additional suggestions on how use the Zerolag Oscillator is discussed in our posts on Pullback Trading and Trend Trading System Design.
Available for NinjaTrader 7 and 8
| Indicator Price | $ 245.00 | ||