The Zweig Breadth Thrust, or simply ZBT, is a technical indicator devised by the late, great Martin Zweig. This indicator consists of three components, with the main goal being to identify overbought and oversold market conditions. Developed in the early 1970s, the ZBT has become an integral part of many technical traders’ trading arsenals.
First, let’s explore the meaning of the ZBT. The indicator’s principle is based on the theory that healthy markets have breadth and depth. The ZBT monitors a market or index’s “breadth” by looking at the number of advancing and declining securities within it. It then looks at the “depth” by checking the number of new highs or lows compared to the total number of securities. When the ZBT crosses above a certain level, called the “trigger,” it is signaling a market top. Conversely, when ZBT crosses below a trigger, it is suggesting a market bottom.
The ZBT is comprised of three components: new highs and lows, advancing issues, and declining issues. To calculate the ZBT, subtract the number of declining issues from the number of advancing ones. Next, add the new highs to total number of issues, and subtract the new lows from this number. This third number is the ZBT. When the number is above the trigger level, you can buy, and when it’s below the trigger level, you can sell.
However, while the ZBT can be an effective tool for many technical traders, there is something missing from the indicator. Specifically, the ZBT does not factor in the volume of transactions that take place. Volume is an important element in the technical analysis of a security, and without it, the ZBT’s results can be misleading.
In conclusion, the Zweig Breadth Thrust is a useful and popular technical indicator. However, while it can identify overbought and oversold conditions, it does not factor in the amount of volume that transactions take place. Therefore, traders should take caution when using the ZBT and should make sure to supplement it with other indicators that consider this element.
The Zweig Breadth Thrust, or simply ZBT, is a technical indicator devised by the late, great Martin Zweig. This indicator consists of three components, with the main goal being to identify overbought and oversold market conditions. Developed in the early 1970s, the ZBT has become an integral part of many technical traders’ trading arsenals.
First, let’s explore the meaning of the ZBT. The indicator’s principle is based on the theory that healthy markets have breadth and depth. The ZBT monitors a market or index’s “breadth” by looking at the number of advancing and declining securities within it. It then looks at the “depth” by checking the number of new highs or lows compared to the total number of securities. When the ZBT crosses above a certain level, called the “trigger,” it is signaling a market top. Conversely, when ZBT crosses below a trigger, it is suggesting a market bottom.
The ZBT is comprised of three components: new highs and lows, advancing issues, and declining issues. To calculate the ZBT, subtract the number of declining issues from the number of advancing ones. Next, add the new highs to total number of issues, and subtract the new lows from this number. This third number is the ZBT. When the number is above the trigger level, you can buy, and when it’s below the trigger level, you can sell.
However, while the ZBT can be an effective tool for many technical traders, there is something missing from the indicator. Specifically, the ZBT does not factor in the volume of transactions that take place. Volume is an important element in the technical analysis of a security, and without it, the ZBT’s results can be misleading.
In conclusion, the Zweig Breadth Thrust is a useful and popular technical indicator. However, while it can identify overbought and oversold conditions, it does not factor in the amount of volume that transactions take place. Therefore, traders should take caution when using the ZBT and should make sure to supplement it with other indicators that consider this element.
