What is the ZigZag Indicator?
The ZigZag Indicator is a technical indicator used to analyze the movement of an asset’s price. It shows the SWING HIGHS and SWING LOWS of a market.
The ZigZag Indicator is named after the pattern of straight lines that appear to zig-zag horizontally across the price chart.
Visually, the indicator appears like an unbroken line similar to a zigzag, which is where the name comes from.
Simply put, the lines of the Indicator will draw a “UP LEG” followed by a “DOWN LEG” between each highest and lowest point of the price repetitively on the chart.
These Zigzag lines link the tops and bottoms of the price to show price directions.
The markets do not just move straight up and neither do they just move straight down.
There are always waves and price swings/peaks and valleys which occur inside every price movement.
Therefore, to get the overall trend, it is necessary to use the ZigZag Indicator which flattens the trend by moving straight up and straight down while ignoring insignificant peaks and valleys along the way.
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How to Set up the ZigZag Indicator on Olymp Trade.
Here are the steps to follow to set up the Zigzag indicator in Olymp Trade.
- Login to the Olymp Trade platform.
- Locate on the top right below the profile tab three prominent tabs namely; the indicator tab, the line tab, and the chart period tab then select the tab containing a resemblance of the capital letter ‘A’, the INDICATORS TAB.
- It will bring three options which are the Strategies, Indicators, and Oscillators. Choose INDICATORS.
- Locate at the bottom a button reading “ALL INDICATORS” and hit it.
- Choose ZIGZAG INDICATOR from the indicators shown on the list.
- Hit the Button “ADD TO THE CHART” which pops up.
- Press the back button to return to the chart and confirm that an unbroken line similar to a zigzag connecting the tops and bottoms of the price has been added to the chart.
There you go!!
You can adjust the depth of the Indicator by hitting the ZigZag Indicator from the list of indicators in use.
The bigger the depth value, the larger the time frame that the Indicator refers to when drawing trend patterns. Conversely, the smaller the depth value, the narrower the time frame referred to by the indicator in drawing the trends.
How to use the ZigZag Indicator to Trade Forex on Olymp Trade.
The ZigZag Indicator is easy to understand and use.
Looking at the chart above you can identify Zigzag movements of the price as well as the ZigZag Indicator drawing the Zigzag patterns of the trend between the price tops and the price bottoms.
As earlier hinted, the ZigZag Indicator is an indicator used to analyze the movement of an asset’s price.
Basically, if a “UP LEG” of the Zigzag is forming, the trend is UPWARDS. On the contrary, if a “DOWN LEG” of the Zigzag is forming, the trend is DOWNWARDS! Easy?
Very easy of course!!
It is, however, worth noting that the ZigZag Indicator does not forecast the future behavior of the price.
It, however, shows how the price has changed in the past – the direction of trends and their reversal points. Using this information, you can then make a decision about whether to buy or sell.
It is only used in combination with other indicators. Therefore, do not expect 100% sure signs to buy or sell but rather, estimate price movement and reversal points.
According to the recommendations of the Olymp Trade platform, the ZigZag Indicator is best used over long time frames – one hour or more.
This indicator will help you to identify price trends because it attempts to show trend changes. The Zigzag lines will appear when there is a price movement between a swing high and a swing low.
Other importance of the Zigzag Indicator.
The ZigZag Indicator is also used to filter out relatively small movements (those below a specific threshold determined by the depth value).
Making it easier to only focus on important trends and confirm possible price reversals!
Note – the goal is to focus on the IMPORTANT TRENDS, not insignificant fluctuations – leading to a simplified, easy to analyze chart.
Also, keep in mind, the higher you set the depth value, the less sensitive the indicator becomes thus removing more “Market noise” making the indicator more effective in the prediction of trends.
On the contrary, if you set the depth value too low, the indicator becomes too sensitive resulting in an ineffective trend prediction since not enough noise is removed.
Olymp trade recommends the use of the ZigZag Indicator in its default settings though that depends on the individual trader’s strategy.
Very easy to use, right? Definitely!
Points to Remember!
- Visually, the ZigZag Indicator appears like an unbroken line similar to a zigzag, which is where the name comes from!
- The markets do not just move straight up and neither do they just move straight down. There are always waves and price swings/peaks and valleys which occur inside every price movement. Therefore, to get the overall trend, the ZigZag Indicator flattens the trend by moving straight up and straight down while ignoring insignificant peaks and valleys!
- Basically, if a “UP LEG” of the Zigzag is forming, the trend is UPWARDS while if a “DOWN LEG” is forming, the trend is DOWNWARDS!
- The Indicator does not forecast the future behavior of the price but shows how the price has changed in the past which can be used to make appropriate decisions on whether to buy or sell!
- The ZigZag Indicator doesn’t give signals for opening trades, so don’t use it as a stand-alone indicator but in combination with other indicators!
- The Indicator is best used over long time frames – one hour or more!
- The higher the depth value the less sensitive the indicator becomes, making it more effective and vice versa!
- Olymp trade recommends the use of the ZigZag Indicator in its default settings!