The Zig Zag indicator lowers the impact of random price fluctuations and is used to help identify price trends and changes in price trends.
The Zig Zag draws trendlines on charts which connect swing highs and lows. However, it only produces lines when the highs or lows represent a significant price movement. “Significant” is defined by the percentage move threshold set for the Zig Zag. The chart below shows how the Zig Zag (the yellow line) does not react…
The Zig Zag indicator plot points on a chart whenever prices reverse by a percentage greater than a pre-chosen variable. An analyst can set the percentage level to trigger the indicator. Straight lines are then drawn, connecting these points. The indicator is used to help identify price trends. It eliminates random price fluctuations and attempts to…
The swing highs and lows that the Zig Zag indicator identifies may represent future support or resistance levels. It can, therefore, help traders spot key price levels that may be control points for future trading. The Zig Zag sometimes reveals a major trend change by virtue of the lines it draws marking out a well-known…
Like other trend-following indicators, buy and sell signals are based on past price history that may not be predictive of future price action. For example, the majority of a trend may have already happened when a Zig Zag line finally appears. Traders should be aware the most recent Zig Zag line may not be permanent. When price changes…
SharpCharts users can choose between the normal “ZigZag” and “ZigZag (Retrace.).” As shown in the examples above, the normal ZigZag shows lines that move at least a specific percentage. The ZigZag (Retrace.) connects the reaction highs and lows with labels that measure the prior move. The numbers on the dotted lines reflect the difference between…
