Good day, Beautiful people! We’ll look at the Zig Zag indicator today, which is also rather popular. The indicator’s name stems from the fact that during price extremes, it draws a broken line on the chart. The broker I used in this blog is Libertex. You view other Top Forex Brokers.
The Zig Zag indicator line alternates between linking price lows and highs that are calculated using specific features. These settings define these parameters and their value functions as a market price noise filter.
The Zig Zag indicator can be found under the terminal’s custom tab (“Insert“-“Indicators“-“Custom“).
The indicator’s parameters are as follows:
Depth – set the minimum number of candles for the indicator to determine extremes, the less, the more sensitive the indicator.
Deviation – is the minimum number of points between the extremes of the next two bars.
Backstep (step back) – the minimum number of bars between the high and the low.
When assigning your parameters, remember that the Backstep value cannot be greater than or equal to Depth, if you do set such values, the indicator simply will not be displayed on the chart.
On the Internet, on forex-related sites, I see only the same type of indicator descriptions, it calculates some percentage ratios, less or more by a certain percentage, they figured out that the Deviation value is calculated as a percentage.
How does the zig zag indicator works?
This is a zigzag indicator
Let’s say the indicator technique finds the least extreme in the depth (depth) of bars, which is set to 12 by default, and we’ll refer to it as point 1. As soon as the price hits its maximum value, the indicator line is set to this value for the previous 12 bars (depth).
If the following local maximum forms, the indicator compares the values of the following local maximum:
Extremum – High ( i)> Deviation
The past high price values are represented by High I, while the current high price value is represented by Extremum.
During an upward journey, the indicator line rearranges its value if each high of the next candle is higher by the Deviation value than the previous one. It redraws the maximum, in a nutshell. As a result, we’ve reached a local peak (point 2).
When the price reverses following the development of the top 2 and its value approach the minimum for the previous 12 bars, the indicator line is set to it.
The indicator compares the following data when a new low is made:
Low (i) – extremum> Deviation
Where Low I is the prior minimum price value, and Extremum is the new minimum price value.
If these conditions are met, the indicator line is rearranged to a new value (by default, the price must drop at least 6 points from the previous candle’s low). Finally, we came to an agreement on a local minimum (point 3).
The backstep parameter’s condition must be met in both cases: it must be greater than or equal to 1.
Without going into great depth, I’ve presented an intuitive mechanism for the indicator’s operation. In other words, I’ve made the language as simple as possible for a layperson to understand. This, I believe, is enough.
The ZigZag indicator is commonly used to examine prior price indicators, indicating a clear trend change.
If I had to enter the market only on the basis of its readings, I’m not sure how or where I’d get indications to initiate positions.
No, some of them are clearly twisted; they enter after drawing the extremes, but this is more like entering blind, and I have no doubt that the deposit will be emptied using this method. Join Doughvest Telegram channel for market updates.
Thanks for reading this article!
Best regards, BABADINA Noah
