The Zig-Zag indicator is a technical analysis tool that might be used to identify classic charting patterns. It also indicates the reversal patterns like head and shoulders top. New variables are used for this In Elliott Wave theory, a zig zag is a pattern consisting of 3 waves labeled A-B-C. Whatever trading strategy you use, please note that the Zig Zag Exit is a lagging indicator and it doesn’t give signals on its own. Given above is an example of a ZigZag chart based on a high – low chart at 6%. The pattern is confirmed with the third leg where price breaks through the recent high. Usually waves W, Y, and Z are zigzags. So a trader will see only 6% and more significant changes in price and will be able to snub the myriad movements that do not impact the overall price trend. Therefore the price movement which is less than 6% does not produce a trend on the chart. The Zig Zag indicator helps the users of Elliott Wave Theory to determine the location of each wave in the trading cycle. At the user's suggestion, it is now possible to select the maximum number of orders allowed for trading. The Zig-Zag indicator is also effective in visually reducing noise and helping the technical trader see larger picture patterns and general market direction. Double Top and Double Bottom Trading Wave X could form any correction pattern, except triangles. Pattern 123 Zig Zag New update to version 8.0 from 08.06.2020. A pattern with three zigzags in a row calls a triple zigzag. Triple zigzag: display and main trading rules. The ZigZag Exit indicator is best used when applied to your favorite proven trading system or strategy to increase consistency. Read more about how to use the 123 pattern here. It is also easy with the help of the Zig Zag to identify support and resistance zones lying in between the highs and lows. The Zig Zag indicator, named for the pattern of straight lines that appear to zig-zag across a technical analysis chart, operates as a filter for directional changes in price movements. Firstly, they're the main rules for this pattern: Double Zigzags subdivide into five waves and labels as W, X, Y, XX, and Z. The ZigZag indicator makes spotting the 123 pattern and using it in your trading incredibly easy because the swing highs and swing lows are already plotted for you.