Friday, September 23, 2016

Daily Market Analysis: GBPUSD Pyramid

How To Use ZigZag Indicator For Trading & Its Settings

About ZigZag Indicator many trader are confused. I am today going to highlight some of its features, settings & proper way of using it for your trading success.

ZigZag basically plots waves, helpful for wave traders. It removes noise from market structures & visualize wave in better form to pick highs / lows.

ZigZag has 3 parameters:

  • Depth: The minimum number of price bars required where there is no secondary high or low.
  • Deviation: The number of pips that pips can deviate above the previously plotted high or low for the ZigZag indicator to re-change its highs and lows
  • Backstep: The minimum amount of bars between which the highs and lows can be plotted.

Now, how it use it efficiently as follows:

Suppose you are trading a minute chart and you want to view hourly Waves in minute chart.
Then in ZigZag settings, put 60 at Depth, that means for 60 minutes, 60 bars.
For Deviation put 5, if you want 5 pips or points deviation in price.
For Backstep put 15. That means minimum amount of bars for a wave, i.e it will take 15 minutes waves too.

Chart should look like this:

ZigZag with Pitchfork
I added a pitchfork too along with it. So it looks visually predictable.
You can try different setup for zigzag do some experiment & find which your suitable one.

Best Regards