Confirming the last leg of a zigzag trend filter

A zigzag-style trend filter can be calculated from the open, high, low, or close. It drops moves smaller than a user-set point or percentage sensitivity threshold and keeps only the swings that meet that threshold.

Those kept peaks and troughs are shown as a swing chart: a sequence of successive legs that makes the larger price swings easier to inspect. Straight trendline segments connect the swing points.

How the swing chart is constructed

Lower sensitivity settings produce more frequent, more volatile swings. Higher settings produce fewer, larger ones.

Because peaks and troughs require reversal confirmation, a new swing point cannot be identified without at least a one-bar delay. A swing point is a peak or trough that anchors the current last leg and can be labeled only after at least one confirming bar.

Why the last connecting line stays revisable

The unfinished last leg of the swing chart remains provisional. Trendline segments that connect filtered peaks and troughs can be erased and redrawn when a later move fails the threshold.

That unfinished connecting segment is the dynamic last leg. It remains revisable until the sensitivity threshold is exceeded.

When the last leg is locked

After the price change from the latest swing point exceeds the same threshold used by the filter, that last leg is locked and is no longer revised.

Last-leg confirmation is the absolute percentage or point distance between the latest price and the last swing-point value, compared with the filter threshold.

A present-tense validity state

A binary companion series can be constructed so it is unconfirmed when a new zigzag direction starts and confirmed when the no-return threshold is reached. That validity state is a present-tense flag: unconfirmed while the last leg is still revisable, and confirmed after the no-return threshold is reached.

Optional alerts can mark an invalid last leg, a confirmed uptrend, and a confirmed downtrend.

Past formations and the present move

Completed historical zigzag formations are already valid for reviewing past trends. The companion is used to judge whether the present move has become important.

Neither series is described as suitable for backtests, because the companion's unconfirmed readings can later be revised.