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The Semafor indicator belongs to the category of so-called situational indicators, i.e., developments that automatically mark interesting situations on the chart, which can carry both informational functions and act as auxiliary trading signals. Also, such indicators are also called arrow indicators. This indicator is an improved version of Semafor_v2.
Outwardly, the Semafor markup is somewhat reminiscent of a wave structure, but this similarity is only a consequence of the use of three ZigZag indicators with different parameter values in the calculations.
The circles numbered with numbers are nothing more than semaphores, but they cannot be used as a full-fledged buy or sell signal, since they are characterized by all the disadvantages of zigzags, the most important of which is redrawing.
Indicator settings
The following variables are provided to configure the Semafor indicator:
Period1, Period2, Period3 - periods for building the ZigZag;
Dev_Step_1, Dev_Step_2, Dev_Step_3 - deviation and step;
Symbol1, Symbol2, Symbol3 - code designations for marking semaphores. (It is recommended to leave the default values since, in this case, the circles are clearly visible on any template).
It is desirable that all the parameters of the Semaphore indicator are arranged in increasing order, i.e. first the ZigZag of the lowest order is adjusted, and only after that, the medium and large values are optimized. The result will be a structure within which a trader can monitor the situation on three timeframes at once.
Indicator signals
The Semafor algorithm visualizes signals as dots of different colors and sizes.
The smallest brown circles are the extremes of the first Zigzag. Medium purple circles are the extremes of the second Zigzag. The largest red and green circles are indicators of the third Zigzag. They should be considered as more significant possible reversals in the current situation.
Conclusion
Considering the fact that this indicator, as well as the ZigZag itself (on the basis of which it is built) is redrawn, we recommend using Semafor as an additional signal filter together with other technical means of assessment and forecasting. Many experienced traders also use the Semafor indicator to assess trends and plot tangent lines.
