The zig-zag indicator is an indicator that serves to show changes in trends that occur in price movements. Usually, zig-zag is used by traders to look for price reversal points or reversals. At a point that is considered a reversal point, it will be connected by changes in zig-zag lines.
You need to know the zigzag is very sensitive to any price movements, so you need to be careful when using this indicator. Because this is very sensitive, you are not recommended to use zigzag as a single indicator. You need to add a number of other indicators, but the zigzag indicator is used only as a tool in finding waves in the Elliot wave system.
This indicator is needed to determine trend movements while indicating maximum prices and minimal prices.
At first glance everything is clear but this indicator is not too easy to understand. The trading strategy that uses this indicator only is a strategy that not wise because this indicator, like most other indicators, changes its direction or in other hand included as repaint indicator. But actually, this indicator is a good indicator if the trader already having good skill for using this indicator properly
Zig-zag indicator combination with MACD
To display this Zig-zag indicator by calling it by clicking on the indicator list on the MetaTrader 4 used and then selecting the custom indicator, there will be a Zig Zag indicator at the bottom of the list of indicators.
Determine the number 62. That is the percent change in price from the minimum or maximum number shown by this indicator with the intention that if the zigzag describes a straight line on the chart and shows a minimum number then the next straight line that shows the maximum number will appear after the price moves 62% more.
There is a negative side to this indicator. If the price does not pass this percent parameter and flips and moves next in the same direction, the zigzag image will change too. Therefore, the indicator should be determined manually.
So, when the required percent limit is determined, the trader can see the results. The indicator describes only the maximum and minimum numbers that exceed the number of percents that has been determined
Next, let's take another indicator as a zig-zag help tool, which is MACD and underline when the most important is the entry point.
In this picture, it can be seen that when the signals of the two indicators are connected we can conclude that if zig-zag have worked on the minimum number, the opening of the MACD signal order can be prepared. But the possibility of changing the signal image and then the MACD held by zigzag also exists, but if we examine it again divergence can be seen.
So, the maximum number of indicators shows that you should look for buy signals from the help tool. In this situation, zig-zags and MACD help each other.
But there is a second possibility to use this indicator. This possibility is according to the Elliot wave principle. The zig-zag indicator works on impulse and correction waves. The impulse wave includes five small waves and towards the bigger and stronger tendency, while the correction wave includes three small waves and moves towards the tendency.
Zigzag indicators with moving average
In forex trading, you can combine zigzag indicators with moving average indicators to get profit in trading. It is recommended that you use the MetaTrader to display the indicator.
The following is a setup guide for the zig-zag & moving average indicator.
Open your MetaTrader.
Make sure your MetaTrader is active & online.
Open the Daily (D1) timeframe
For Zigzag settings: open the insert menu, indicators, custom, then select zig zag.
Because we do take the default from MetaTrader, then we just click ok. If you want to change the color and thickness of the line is also allowed, please click Colors.
Zig Zag shows past performance trends and only the most important changes. This indicator filters all changes less than a certain number. Zig Zag can help you see changes by highlighting the most important reversals. In the last segment in Zig Zag, it can change based on basic plot changes.
Without moving averages or other trend indicators, don't try to trade only with zig- zag
For Moving Average settings: open the insert menu, indicators, trends, then select Moving Average. Select period: 2, then click Ok.
Repeat the process, to get the moving average period 4, distinguish the color from the moving average 2.Again, repeat the process to display 30 moving average indicators.
How to use for the two indicators are as follows:
If Zig Zag has connected the price from top to bottom or vice versa then there is a trend change if the average moving 2 has crossed/passed the moving average 4. If the moving average 2 is a 4 cross moving average from the bottom up, and there are zig-zag connections, then you can do open Buy.
Conversely, if the average moving 2 is already cross moving average 4 from top to bottom then you can open sell, especially if the zig-zag has made a connection.
If the moving average 2 is already cross moving average 4 and in a few days later it has crossed the moving average of 30 then there will be a trend of a significant increase or decrease in price. The target in 1 day using this indicator is 20-100 points.
Using double zig-zag with Bollinger bands
Zigzag settings 1:
Zig-Zag 2 Settings:
Put Bollinger Bands Inator
To install the Bollinger Bands indicator, you can directly from the MetaTrader application, by clicking Insert, select indicators, Trend, then select Bollinger Bands.
Bollinger Bands Settings:
Apply to: Close
Style: SeaGreen Medium
HOW TO ENTRY:
Pay attention to the meeting point between the red zigzag and zigzag gold, when it is located at the bottom of the ribbon and the upper ribbon. If the zigzag and zigzag gold meetings are supported, be prepared to do a Buy position and if the red zigzag and zigzag gold are in the resistance point, be prepared to take a Sell position. The good Time Frame used for Entry is Timeframe H1.
Double Zigzag and Bollinger bands are a combination of easy-to-understand and many successful indicators used in Forex trading.