ZigZag
Type
"Filter"
Short introduction
The ZigZag is neither an oscillator nor a trend follower, but a kind of "filter" that ignores price movements below a defined limit.
Statement
A ZigZag of "x%" only records changes that are greater than "x%", measured from high to low or analogously from low to high; smaller changes are ignored. It connects the reversal points with a line. The direction of the line only changes when an upward or downward trend phase corresponding to the set percentage has ended. However, predictions do not seem possible.
Formula/calculation
D = ((Ct-E)/E)*100
where:
D = current value (last point) of the ZigZag
E = last reversal point
The last ZigZag line therefore runs downwards for D < 0 and upwards for D > 0. However, D is only a new reversal point if prices do not rise (or fall) any further in the future, taking into account the defined limit.
Interpretation
The ZigZag shows the trend of the past and indicates the direction of the current trend phase. Forecasts should not be derived from this "filter", it merely makes the behavior of a security or an indicator visible.
Default setting
- 5%
Basic trading systems
- None
Related indicators
- None