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Forex Indicator ZigZag

The Zig Zag indicator operates as a filter for directional changes in price movements. Technical analysts and forex traders apply the Zig Zag filter to remove unnecessary noise from the price chart; the goal is to focus on the important trends, not insignificant fluctuations. This indicator is less ambitious than many other technical tools and should never act as a trading system on its own. Instead, the Zig Zag indicator is best used to highlight important patterns and confirm possible trend reversals.

How the Zig Zag Indicator Works

The Zig Zag indicator is easy to understand and apply. Price changes below a specific threshold, normally 10% or 20%, are removed from trendlines through a filtration process. Most trading software or online trading platforms have simple input fields that allow you to set the parameters of your own Zig Zag preferences.

Keep in mind that the higher you set the price change threshold, the less sensitive the indicator becomes. Too low of a spot results in an ineffective Zig Zag; not enough noise is removed. Too restrictive and you may miss profitable price trend data. Most default settings have the threshold between 8% and 15%.

 

 

 

Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. 

 

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