The zig zag indicator is a bit more serious than its name would imply. The zig zag is a very basic indicator which attempts to reduce the amount of “noise” in a trending instrument. The aim of the zig zag indicator is to assist traders with staying in a winning position and avoid the urge to close positions on the minor reactions, which are commonplace in the market. Users can set the percentage move that will generate a change in the zig zag signal. The default value for the zig zag is 5%. This means that any counter move less than 5% will not generate a signal on the chart. Hence a trader will be able to ignore the countless minor moves that have no affect on the primary trend.

One way to use this indicator is to have several ZigZag indicators on your chart using several deviation parameters. The idea is that when the smaller deviation ZigZag indicator is inverse the larger, this is a trigger to make your trade in the direction of the larger deviation ZigZag indicator.  Give this a try and let me know what you discover.

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