Introduction to the 3 Level ZZ Semafor Indicator
Swing highs and swing lows are some of the most relevant price points for many technical traders. Price action traders use it to identify trend direction, while market flow traders use it to identify key price levels.
However, most new traders would find it difficult to effectively identify swing highs and swing lows on a naked chart. The 3 Level ZZ Semafor indicator is a tool which new traders can use to help them objectively identify swing highs and swing lows.
What is the 3 Level ZZ Semafor Indicator?
The 3 Level ZZ Semafor indicator is a custom technical indicator which identifies the swing highs and swing lows of price action.
It plots three sets of dots to indicate the swing highs and swing lows. Larger dots indicate major swing highs and swing lows, while smaller dots indicate minor swing highs and swing lows.
The template of the indicator used here plots blue dots above price action to indicate a swing high, and red dots below price action to indicate a swing low.
How the 3 Level ZZ Semafor Indicator Works?
The 3 Level ZZ Semafor indicator uses three underlying Zigzag indicators. The minor swing highs and swing lows are based on a Zigzag indicator which is set to be very sensitive to price fluctuations, while the major swing highs and swing lows are based on a Zigzag indicator which is less sensitive and more reliable.
How to use the 3 Level ZZ Semafor Indicator for MT5
Since the 3 Level ZZ Semafor indicator is based on three underlying Zigzag indicators, its settings also allow for the modification of its underlying Zigzag indicators. These modifications can be don on the various “Deviation”, “Backstep”, and “Period” variables.
The 3 Levels ZZ Semafor indicator can be used as a trend direction indicator using the concept of price action. Traders can identify uptrend markets based on swing high and swing levels that are consistently rising. Downtrend markets can also be identified based on swing high and swing low levels that are consistently dropping.
The dots can also be used as a basis for identifying horizontal support and resistance areas or supply and demand zones.
Buy Trade Setup
When to Enter?
Identify a demand zone based on a major swing low identified by the 3 Levels ZZ Semafor indicator. Open a buy order as soon as another swing low is identified by the 3 Levels ZZ Semafor indicator as price touches the demand zone. Set the stop loss below the support level.
When to Exit?
Set the take profit target on the next major swing high level.
Sell Trade Setup
When to Enter?
Identify a supply zone based on a major swing high identified by the 3 Levels ZZ Semafor indicator. Open a sell order as soon as another swing high is identified by the 3 Levels ZZ Semafor indicator as price touches the supply zone. Set the stop loss above the resistance level.
When to Exit?
Set the take profit target on the next major swing low level.
Conclusion
The 3 Level ZZ Semafor indicator is a very useful technical indicator. It is best used for market flow trading wherein traders can identify key horizontal support and resistance levels based on major swing highs and swing lows.
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