Traders often use technical indicators in order to discover the best trading opportunities. It is easier to analyse the market with their help. There are many different kinds of indicators, and it is good to know them and check what serves you well. So to arm you with the knowledge, today I will describe the Zig Zag indicator for you.
Zig Zag introduction
The Zig Zag indicator displays the swing lows and swing highs of the market. Its name derives from its appearance on the price chart. It is in a form of a continuous line that zigzags horizontally through the price bars.
Adding the Zig Zag indicator to the Olymp Trade chart
In order to add the Zig Zag indicator to your chart, you must be logged in to your Olymp Trade account. Once you choose the financial instrument and the chart type, click on the technical indicators icon. Find the Zig Zag on the list of the indicators and click on it. It will be then added to your chart.
Look at the exemplary chart below. This is how the Zig Zag line looks like on the price chart. It zigzags from the lowest point of the price to the highest point showing the direction in which the price is moving.
The price is in constant motion. But it does not go in the straight line. Even in the uptrend, it sometimes goes down. And in the downtrend, it occasionally rises. With the Zig Zag indicator, you get a clear picture of the price direction. It connects the lowest and the highest points of the price omitting insignificant shifts along the way.
As with any other indicator, the Zig Zag comes with default settings. You can naturally change them if needed. To do this, click on the pen icon next to the indicator’s name.
When you increase the value of the depth of the Zig Zag, the indicator will refer to the bigger time frame and so the noise will be reduced.
The noise will be bigger and the time frame that the Zig Zag refers to smaller when you choose a smaller depth value.
Trading with the Zig Zag indicator at Olymp Trade
The readings of the Zig Zag are quite uncomplicated. When you see the indicator is moving up, you can assume there is an uptrend in the market. When it is zigzagging down, there is a downtrend.
The Zig Zag indicator is used to analyse the price movement. But it is impossible to predict the future price behaviour with it. You can analyse the past trends and reversal points but it will not give you signals to open trading positions. That is why it is good to combine it with another indicator.
The line of the Zig Zag indicator appears when the price moves between a swing low and a swing high. The indicator flattens the trend and so it is easier to concentrate on important price fluctuations. That is why the Zig Zag can be of help in the task of identifying the trends.
It works best on longer time frames, 1 hour or more.
The higher the depth of the indicator, the less sensitive it becomes and removes more noise. At the same time, it will be more effective in the trends prediction.
Basically, when the indicator goes up it can be assumed there is an uptrend. When the indicator goes down, there is a downtrend in the market.
Remember it is not the indicator to use as a stand-alone indicator. Add a different one to get the signals to open a transaction.
Olymp Trade offers a free demo account. This is a perfect place to check a new indicator out.
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