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Zigzag indicator tutorial

Harmonic pattern AB=CD
Harmonic pattern AB=CD
مارس 20, 2023
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Zigzag indicator tutorial

Zigzag indicator tutorial

The zigzag indicator on the price chart identifies points that will result in more changes than the previous wave. Then by drawing lines between the points, they connect them to This technical analysis indicator is used to help identify price trends. It also eliminates random price fluctuations and attempts to show trend changes. By filtering out minor price movements, this indicator makes trends easier on all time frames.


What does the zigzag indicator tell us?


The Zig Zag indicator is often used in conjunction with the Elliot Wave Theory to determine the position of each wave in the overall cycle. Traders can experiment with different settings to improve their results. For example, a setting of 4% can show waves more clearly than a setting of 5%. Each stock has its own price pattern, so traders should update the zig-zag indicator settings according to each price trend.

Zigzag lines can also indicate reversal patterns, such as double bottoms and head and shoulders patterns. Traders can use popular indicators such as RSI or MACD during zig-zag reversals to establish oversold/oversold points.


An investor may hold a position as long as the zig-zag has not changed direction. For example, if an investor has a long position, he will not sell his holding until the ZigZag indicator goes down.


Zigzag indicator limitations


Like other trend-following indicators, buy and sell signals are based on historical price data, which does not necessarily predict the future. For example, when a zigzag appears, a trend is formed.

Traders should be aware that the last zigzag line is not necessarily continuous. When the price changes direction, the indicator starts to form a new line. If the change in price direction is general, the current line is removed and replaced by a new line.

One of the best ways to trade in the market and also an easy way to make money in the stock market is to use the zigzag trading strategy. The zigzag pattern will give you a clearer view of market price fluctuations in different time frames.

You can do swing trades, day trades and even scalp with zigzag pattern. We will also teach you fractal trading strategy.

We’re sure if you’ve spent a few minutes in the market, you’ve noticed that markets don’t just go straight up and down. There are always waves or fluctuations in prices and ups and downs or peaks and valleys that happen in every price movement.

It doesn’t matter if we are trading up or down, you will still have this wave movement of prices. We can use the zigzag pattern to find important areas to take advantage of.


What is the zigzag indicator?


Zigzag indicator is an outstanding technical indicator. If you are looking for trading chart patterns such as Fibonacci retracements, Elliott wave analysis or any type of price behavior that uses the concept of wave analysis, you can use the Zigzag indicator.


This indicator is available in most trading software.


In the rest of the article, we are going to talk about the zigzag indicator and give you a brief explanation of how to trade with the zigzag indicator.


If you really want to cover the appropriate and sufficient price data, the parameters of the zigzag indicator are very important so that the indicator can show zigzag waves on your chart.


These are the input parameters you need to specify:


Depth – refers to the amount of return to the candlestick chart. To reach the upper and lower limits, you need to make sure you have enough “depth”.

Deviation – What percentage of price change does it take to change the trend line from positive to negative?


It’s important to play around with these parameters until you find the right trading style for you.


But if the parameters are set to narrow, you can have a very zigzagging effect. But we want to take a broader view of what the real ups and downs are.


Once you’ve set the zigzag parameters, you should look at three things:


  1. A price symmetry that should give you a nice, even geometric wave, ie the AB = CD pattern.


  1. Wave depth which should give you good depth of waves between lows and swing highs.


  1. The price level ahead, which should ensure that you are able to recognize a trend.


How to trade with zigzag indicator


The zigzag swing trading strategy presented below requires the use of a specific indicator. Fibonacci sequence indicator is also used to confirm the ABCD pattern, but it will also be used for trade management.


Now, before we go any further, we always recommend that you grab a piece of paper and a pen and write down the rules for this input method.


For this article, we’re going to look at the buyer side.


Step #1: Set Zigzag Indicator settings to 20 for depth and 5% deviation.


First, we want to ensure that the zigzag tool will show more significant tops and bottoms in a highly volatile market. forTherefore, we should use at least 20 periods for depth and 5% deviation to accurately represent market volatility. Pay attention to the image below:


Now we are all ready to conquer the market fluctuations.


Step #2: Plot the expansion of the Fibonacci sequence, when the first two waves of the swing are established.


To plot the Fibonacci Extension of the Fibonacci sequence, we need three reference points. As soon as the first two waves of this zigzag pattern developed, we proposed three swing levels that we intend to draw the levels of the Fibonacci sequence.


In this indicator, it only shows the fluctuation of the floor very late, and it is not suitable to rely on it when opening a trade. This is the main reason why we use different trading methods to predict the more likely ending point of the zigzag.


Step #3: Wait for the third wave to end between 0.618 – 0.786 or between 1.0 – 1.272


The reality is that market symmetry does not happen very often. The pattern AB = CD needs a lot of precision to have all the conditions that this pattern must have to be valid.


Since we cannot be sure where the third wave will end, we are going to apply one of our favorite trading techniques to the swing point in the market.


Step #4: Wait until you have a candle with a lower floor on the right and left. The right candlestick should break above the left candlestick.


The three candlestick pattern that detects the swing point of the market is very simple.


All you have to do is wait for a candle to appear that has a higher floor on the left and right side of it. For this three candlestick pattern it should also be confirmed that we also need a candle from the right to break above the candles on the left.




The idea behind this strategy is simply to have a better assessment of the trend so that you can make better trading decisions. You can also read successful trading strategy based on news.