Zig Zag Indicator

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Zig Zag Indicator

The Zig Zag Indicator can be used to filter out relatively small price movements. You can preset the deviation as a percentage in order to discard smaller moves. The indicator only draws a line if a relative price move is bigger than the set deviation, thus clarifying the chart by removing market noise and ignoring sideways moves. It does not generate automatic signals. Traders can use it by itself to visualise the current trend or together with other analysis techniques such as Elliott Wave, Support and Resistance and price patterns like the Double Top or the Parallel Channel.

Please note that every up leg is always followed by a down leg and vice versa. The Zig Zag indicator is similar to a moving average: both signal a trend change when the indicator changes direction. Whether used alone or in combination with other techniques, the Zig Zag indicator is a useful tool in a technical trader's toolbox.
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