What it is
The Zig Zag indicator is a trend-following tool that simplifies price charts by eliminating minor fluctuations. It connects significant highs and lows, revealing the underlying market structure.
How it works
It calculates price changes based on a percentage threshold. If a price reverses by more than the set value, a new line is drawn. This ignores small movements, focusing on major reversals.
Trading signals
- Trend identification: Higher highs and higher lows indicate an uptrend.
- Reversal points: A change in the direction of the lines often marks potential support or resistance levels.
Basic settings
The primary setting is Deviation, which defines the percentage change required to form a new leg. Adjusting this value changes the sensitivity of the indicator. This content is for educational purposes only, not financial advice.
