ZigZag Indicator Usage, Calculations Details

The zigzag indicator is a very diverse indicator. It allows for a huge versatility in both trading and analysis. This indicator can be used to filter out relatively small price movements. The ZigZag indicator is what is known as a filtering or smoothing indicator. In this indicator primary purpose is to filter out insignificant fluctuations in the price of a security and accurately track whatever the existing trend is. The ZigZag indicator can also be used to identify support and resistance price levels in a market. This indicator is a technical indicator that measures the swing highs and swing lows of a market. The Zigzag indicator tool is primarily used to filter out the market noise.

The traders are getting more details regarding the ZigZag indicator, then please open the STUDIES section of Zerodha Kite. The traders are also visiting in Kite mobile App. Distance is 10. If you want to change this value up or down then you can change it. The traders can also check attaching process of the ZigZag indicator to Reliance Industries share price chart. Charts of this indicator include various time limits, daily, weekly, monthly or intraday.

ZigZag Indicator Settings

Introduction :

The ZigZag indicator is mainly used to help identify price trends of the traders. This indicator eliminates random price fluctuations and attempts to show trend changes. The ZigZag lines of this indicator only appear when there is a price movement between swing highs and a swing lows that is greater than a specified percentage usually 5%. The  ZigZag indicator is a bit more serious than its name would imply. This indicator is a very basic indicator which attempts to reduce the amount of “noise” in a trending security. The ZigZag indicator is to assist traders with staying in a winning position and this is the main part of this indicator. The main avoid of this indicator urge to close positions on the minor reactions, which are commonplace in the market. The traders can set the percentage move that will generate a change in the ZigZag signal. The default value for the ZigZag indicator is 5%. This means that any counter move less than 5% will not generate a signal on the chart of this indicator.

Trading with the ZigZag Indicator :

The ZigZag indicator does not predict future trends. This helps identify potential future areas of support and resistance from the swing highs and swing lows it plots of this indicator. The ZigZag lines of this ZigZag indicator can also be used to spot reversal charts patterns, like as a double bottom or a head and shoulders top. Traders can use other technical indicators, likes the relative strength index (RSI) and/or the stochastic oscillator to confirm that the price of a security is overbought or oversold when the ZigZag line changes the direction of this indicator. A momentum investor of ZigZag indicator might use the indicator to remain in a trade until the ZigZag line confirms in the opposite direction. As an example, if the traders hold a long position, they would not sell until the ZigZag line turns downward of this indicator.

ZigZag Indicator Formula

Traders should be aware that the most recent ZigZag line of ZigZag indicator may not be permanent. When the price changes direction, then the indicator starts to draw a new line. If that ZigZag line of this indicator does not reach the indicator’s percentage setting and the price of the security reverses direction. In the ZigZag line is removed and replaced by an extended ZigZag line in the trend’s original direction of this ZigZag indicator. In all of the traders, many traders use the ZZI to confirm the direction of the trend rather than timing an entry or exit.

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Zigzag Indicator with Upstox and Fyers

Here, we are going to present the Zigzag indicator with two different scripts from two different platforms, Fyers and Upstox.

Zigzag indicator fyers

ZigZag Indicator Usage, Calculations Details upstox

In the first chart, ONGC script is added and in the second chart, there is HDFC bank. The zigzag indicator moves with the changing price. It helps to find out the support-resistance level as well as the target-stop loss. Traders can do basic trend analysis by using the specific indicator. Another reason for using the indicator is to reduce the noise. It clearly reflects the trend reversal as well as the trend changing pattern.

Conclusions :

In the ZZI, ZigZag lines simply react when prices move a certain percentage. The traders can apply an array of technical analysis tools to the ZigZag. Traders are can perform basic trend analysis by comparing reaction highs and lows of this indicator. They can also overlay the ZigZag feature to look for price patterns that might not be as visible on a normal bar or line chart of this ZZI. The ZigZag indicator has a way of highlighting the important movements and ignoring the noise. When the traders are using the ZigZag indicator’s feature, then don’t forget to measure the last line to determine if it is temporary or permanent. The last ZigZag line of this indicator is temporary if the current price change is less than the ZigZag parameter. The last line is permanent when the price change is greater than or equal to the ZigZag parameter of the ZigZag indicator.

Ankita has done her Diploma Engineering in Computer Science & Technology. She is pursuing her degree in Engineering and also well experienced in the equity market and real estate related content writing. She is the one who has developed the technical indicators section of our site.



Categories: Technical Indicators

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