Zigzag indicator is a line connecting the local maxima and minima in the graphs that show the movement of trading tools. Thus, the more obvious it becomes a general trend of movement, and our attention is not distracted by the intermediate fluctuations within a certain time period.
The Zigzag indicator itself does not predict anything, and does not generate a signal to the input or output, but is often used along with other analytical tools as an assistant.
Zigzag recommend traders practicing wave analysis. After all, the movement between the local maximum and minimum and in fact is a wave.
I propose to consider setting Zigzag indicator, and their example to become better acquainted with the work of Zigzag.
Zigzag indicator configuration
Zigzag indicator has only 3 variable parameters: ExtDepth, ExtDeviation, ExtBackstep. These three parameters define the indicator and what the maximum and minimum account Zigzag indicator.
ExtDeviation - this is the minimum number of points between the maximum (minimum) of two neighboring bars to display Zigzag indicator shaped top of LAN (local minimum). Expressed as a percentage.
ExtDepth - this is the minimum bar, where Zigzag indicator will not build a second maximum (or minimum), if it is less (or more) on the previous ExtDeviation respectively.
ExtBackstep - the minimum number of bars between local maxima, minima.
Changing these parameters affect the sensitivity of the indicator. If we decrease the value of parameters, the number of extrema increases and converges Zigzag, drawing us more lines.
Consider for example, which also illustrates the case where the indicator is useful for identifying Zigzag indicator Elliott wave.
Pair EUR / USD, timeframe = 1 hour.
Figure 1 Zigzag indicator is the default setting: ExtDepth = 12, ExtDeviation = 5, ExtBackstep = 3
In Figure 2, I Shrunk the ExtDepth doubled, to 6. And in the end I turned five-wave Elliott descending pattern. For clarity, I added the numbering of the wave and stretched the Fibonacci grid.
Based on this, as well as take into account the difference in volatility pairs for each trading instrument, it is possible to find such parameters for the Zigzag indicator, which he showed the best option and smoothed small fluctuations in the currency pair movement.
Zigzag indicator Conclusion
Zigzag indicator and its many variations is included in all the most popular forex trading platforms and is a very good tool to visualize local trends.
It can be used as an aide in the identification of waves in Elliott wave analysis.
In the subject offer to share the experience of Zigzag indicator in trading systems, as well as combining it with other indicators.
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