One of the easy ways to make a quick and profitable Forex trading is the Zigzag Indicator Strategy. The Zigzag pattern gives you an unadulterated view of the market situation where you can see and exploit precious swaying in different time frames. With Zigzag Indicator you can do both Swing, Scalping, and Tracing in long-term frames. You can also use the article on the Nova Fractal Trader Indicator.
As you know it better, markets do not go up or down. Anyone who only looks at a chart for a few seconds will understand this. In financial markets such as the Forex markets, we are faced with swinging movements, Elliott waves and peaks and valleys. Thanks to the zigzag pattern we can find the most potential price areas in these waves.
How does the Zigzag indicator help us?
Zigzag Indicator is an extremely practical technical tool if you want to deal with trading patterns such as Eliot waves, Fibonacci or any other tool dealing with waves.
For the TraderNova analytical and trading team, this indicator is on the list of the top 5 metrader indicators, which, if used properly, will help the trader to make good trades. In the following, we want to deal with this in more detail and with an example. So stay with us by the end of this article.
How to work with Zigzag strategy?
As we said, Zig Zag is a technical tool that identifies high and low market swings. This will help you to find them more accurately. In fact, initially the main purpose of this tool is to filter out the misleading market noise.
Removing deceptive fluctuations lets you see a larger, clearer picture of gem movements. Note the image below.
The zigzag indicator parameters must cover enough of the market candlesticks to be checked to be more precise with the waves you see in the chart.
- Depth – This parameter actually specifies the number of candlesticks that the indicator goes back on the chart to draw its waves.
- Deviation – This parameter, expressed as a percentage, tells the indicator how much price change is needed to form a new wave.
There are no great settings for this tool, but what matters is that you spend enough time in the market and play with these parameters to get the best fit for each chart you make.
When playing with these parameters, be sure to note the following:
- Symmetry or order of magnitude should be beautifully visible and the waves as harmonious as possible, almost as in the pattern AB = CD.
- The depth should be adequate to allow the clearance of the upper and lower swing spaces.
Suggested trading instructions with this tool
The ZigZag Swing Trading Strategy presented below requires the use of a specific index. To confirm the ABCD pattern, the Fibonacci additive pattern will be used. It will also be used for business management. Now before we go any further, we always recommend taking a piece of paper and a pen. Note the rules for this login method. For this article we want to review a purchase transaction.
Step 1: Adjust the ZigZag marker settings to a depth of 20 and a deviation of 5%
First, we want to make sure that the ZigZag tool only shows highlights of the market. To do this, we need to use at least 20 periods for depth and 5% deviation to accurately represent market volatility.
Step 2: After the first two waves of oscillation, draw the Fibonacci extension.
To draw the Fibonacci line, we need three points of reference. As soon as the first two waves of the zigzag pattern develop, we offer three levels of oscillation. We intend to use them to map Fibonacci extension levels.
The reason for using Fibonacci extension levels is to predict where the last wave of Zig Zag pattern oscillation will occur.
Zigzag Indicator strategy indicates low volatility just to hedge its trades alone. This is the main reason for using different business tactics. These tactics are used to predict where the zigzag pattern is most likely to end.
Step 3: Wait for the third wave to end between 0.618 – 0.786 or between 1.0 – 1.272
The fact is that market symmetry often doesn’t happen. The AB = CD pattern needs to be very careful to validate all of these conditions. Working with backtesting software, we found that the third wave of the zigzag pattern terminated between 0.618 – 0.786 or 1.0 – 1.272.
Since we can’t be sure where the third wave ends up, we’re going to use one of our favorite trading techniques to pinpoint a market fluctuation.
Step 4: Wait for the candle to be lower with the higher left and right. The right bar should be broken above the left bar.
The three-band pattern is very easy to pinpoint a market swing point. All you have to do is wait until you have a candle that has less candle left and right. To confirm this three-strip pattern, we also need the right bar to break from the top of the bar to the left.
For a better understanding of how low swing oscillation time is determined, we created a simple image (see figure above).
Now you need to extend this pattern between 0.618 – 0.786 or between 1.0 – 1.272. Zigzag’s strategy meets all the trading requirements, meaning we can move forward and outline what conditions are created for our inbound strategy.
Step 5: Zigzag Indicator Strategy: Buy close to the three-band pattern
After completing the three-band pattern, we no longer want to lose, and want to buy in the market. Note that we use the three-band pattern to predict fluctuating market points with all of our trading strategies.
Step 6: Hide your protective loss under the three-stripe pattern.
The loss will stop following the pattern of the three strips. Depending on when you trade, your stop loss may be slightly larger. You want to make sure that the three-strip pattern that has disappeared holds at least a 2% risk. You do not want to risk more than 2% of your account in any given business.
Lastly, we need to determine our profits as well. See below:
Step 7: Earn 2 or 3 times more profit or loss than Stop Loss.
Where is our profit goal going now? The classic ABCD pattern basically keeps you in the 1: 1 risk-reward ratio. Also, many times with the ABCD pattern, you will often find that those target areas are facing forward.
However, when dealing with the Zigzag indicator, you can record two or even three times the risk.
Hope you enjoy this step-by-step guide on how to use the Zigzag indicator strategy to enter your time and identify market swing points. The idea behind this simple strategy is to better evaluate the process so you can make better business decisions. You can also read our winning trading strategy.
By using ZigZag’s trading strategy, you can maintain your winning deals, and prevent the tendency to violate your position for any partial refund that is common in the market.
Thank you for reading. Please comment below if you have any questions about how to trade with the zigzag index!