The 1-2-3 Wave Count by Sylvain Vervoort
Riding The Zigzags
The 1-2-3 Wave Count
In this second part of a seven-article series, find out about the 1-2-3 wave count
system that’s part of the indicator rules for a swing trading strategy (IRSTS).
I have found that about 99% of the time, any move in the financial markets is
composed of three or more up or down waves. The 1-2-3 wave count is based
on this finding. To help count these waves, I will introduce a high-low zigzag
indicator that is based on a fixed-percent price change between high and low prices, or that uses an average true
range (ATR) volatility factor. I have
found that a combination of both
methods makes a good indicator.
In Figure 1 you see an example of a
zigzag between the lowest low and
highest high levels at the turning
points. The minimum change required
in this example is the sum of a 3%
price change and a three-period ATR
multiplied by a factor of 1.5.
I call this zigzag indicator “SVEHLZZperc”
and use NinjaTrader’s
NinjaScript to implement it. I keep
the last lowest low value in parameter
ll and the last highest high value in
parameter hh. I need to store the bar
position of this highest high or lowest
low value. To do this, I use the last
highest bar lhb and last lowest bar llb
as the parameters.