Charting and Studies User Guide - CQG.com

BW Zone Trade (BWZT)
Page 485
The Zone Trade represents the fifth dimension of the Bill Williams indicators. It is designed to
signal traders to add aggressively to a position whenever all the indicators (momentum,
acceleration, and price) are pointing the same way.
The definition of a Zone is when both the momentum and the acceleration are moving in the
same direction. In other words, not only is the momentum moving in a certain direction, but it
is also accelerating.
When both the AO and the AC are increasing, CQG colors the price bars green. When both of
these oscillators are decreasing, the price bars are colored red. Otherwise, the price bars are
gray.
When the current bar is green, the system suggests that traders buy aggressively, but only if
the close of the next bar is higher than the close of the current bar. This is called a "stop close
only" buy order.
Traders should continue to add to their position with each higher close, as long as the bar
remains in the green zone. In a trending market, this will increase the value of their
investment quite rapidly.
Likewise, traders should place a short entry stop when the current price bar is red, and the next
bar's close is lower than the current bar's close.
Using the Zones to Capture Profits
Stock or commodity charts rarely exhibit more than 7 consecutive bars of the same color. This
is because the market must breathe in and out. The market is generally bullish during green
bars, bearish during red bars and undecided during gray bars.
This characteristic allows traders to use the zone bars as a "profit capturing" technique. For
example, once we have 5 consecutive green bars (no grays or reds), traders should move profit
protecting stops to one tick below the low of the 5th green bar. If the next bar's low is higher,
exit stops should be raised to one tick less than that bar. Traders should continue to raise their
stops until the market takes out the position on the highest low.
Do the opposite in a downward market, indicated by 5 consecutive red bars.
Using the Zone indicator takes some of the anxiety out of trading, by telling traders when to be
aggressive and when to take profits.
Remember: This is a stop to take profits and get out. It is not a stop and reverse signal.
BW Zone Trade Parameters
Parameters are selected on the Display window.
Charting and Studies User Guide