Traders often search for new indicators. But they completely forget about analysis tools created a long time ago. And they are still very useful in trading. ZigZag indicator is an example of this. In order to use it successfully in trading, it is necessary to know about some peculiarities and possibilities of this analysis tool. And today I want to tell you about it.

ZigZag indicator settings

It should be noted at once that this indicator is available in MT4. It can be found using the menu items of the terminal “Indicator list” – “Custom”.

Before we get to the parameters, I will explain the essence of this analysis tool. ZigZag determines the significant maximums and minimums of the price and draws straight lines through these points. Its view on the chart corresponds to its name – it is a broken line or a zigzag. It essentially captures the main directions of price movement and makes them clear. In the settings – only three parameters.

With the Depth parameter, you can set a value that indicates the number of candlesticks that have formed since the last break. Their indicator will ignore when determining the next extremum.

Deviation parameter is intended to set the minimum number of points between candlesticks, which will not be smoothed.

And finally, the Backstep parameter indicates the minimum number of candlesticks that can be between breaks.

How the ZigZag indicator can be used in trading

There are several options:

    • the indicator lines can be used to determine the trend direction using its extrema;
    • by its extreme points you can build important levels;
    • indicator lines make it easier to find graphical figures;
    • ion is a useful addition to other analysis tools, such as Bollinger Bands;
  • Elliot Waves calculation will become easier with the use of this indicator.

Pluses and minuses of the ZigZag indicator

I’ve already basically talked about its advantages above. I can add a few more words about that. The ZigZag is a universal tool. He works well on different TFs and currency pairs. Its use eliminates the negative impact on noise trading.

What concerns the drawbacks, I consider only one important. The last line of the indicator is redrawn in accordance with the changes in the market situation. This makes it difficult to predict further price movements.

ZigZag indicator can be effectively used as an additional component of the trading strategy.Fyodorov’s Inga18.07.2018