ZigZag is a trend following indicator which allows to determing trend swings. A combination of ZigZag highs and lows can be used as a support or resistance level. Also it helps to identify significant changes in price and filter out short-term fluctuations.
ZigZag finds extremums in price movement. These extremums reflect the diviations of price that are more than setted value. By default value for a ZigZag is 5%, it will ensure that only price fluctuations of 5% or more will be shown in the chart.
- Determing swings - the most common case of ZigZag usage is an eliminating a small price fluctuations and paying attention on huge price swings.
- Support/Resistant levels - ZigZag also is very helpfull in finding levels of support and resistance, to do it traders generally analyse a price of ZigZag swing and combine closest swings together in one price level