Investment in this currency market is all about speed and accuracy. It pushes a trader to find accurate spots of investment as well as ponder on the intricate details of currency pair movements. The more accurate a trader is, more are his chances of making profit from this market. This is where the concept of a Forex zigzag indicator comes in. Similar to other indications, it performs the job of providing entry and exit points for a currency pair. Besides that there are few other intricacies that one needs to ponder on.
What is a zigzag indicator?
The primary and perhaps most crucial use of this indicator is to judge changes in direction of price movements. It acts as a filter which currency traders and technical analysts use to eliminate unnecessary noise and distractions from the chart. It aims to focus on profitable trends and leave behind all un-important fluctuations.
Another trivial benefit of zigzag patterns is its ability to highlight and reflect trend reversals. These are vital moments for every investor and require an immediate change in the strategic approach.
Working principle of Forex indicators zigzag:
This indicator looks to ponder on significant and substantial price changes. As a result, it looks to eliminate all deflections and volatilities that have less than 10%-20% chance of affecting normal currency movements. However, it offers the option of customization. A trader can configure it to set his own threshold of fluctuation levels and price deflections.
Note: One should keep in mind that too high a threshold renders this indicator ineffective; while too low a threshold does not result any significant patterns, leave aside removing noise.
How to trade currencies using zigzag?
The Forex zigzag indicator receives most popularity among swing traders. It helps them to calculate profitable entry points on possible retracements; thereby providing chances of greater profits. An optimum result can find itself in combination with the Elliot Wave or Fibonacci trading approaches. It brings about consistency among investment signals and backs other strategies as well.
But, one thing of prime importance here is that zigzag is more of a lagging indicator. It only performs predictions depending on lead signals and depends on these signals for accuracy as well.
MACD and Zigzag:
MACD or Moving Average Convergence Divergence is one of the effective ways of incorporating a zigzag indicator. MACDs ponder on horizontal support and resistance levels along with the pivot points of a market. So, a combination of both will help any trader to calculate and forecast the best strategies for investing their currency in.
Often traders look to ponder on counter trend trading. This is where Forex indicators zigzag turn out to be more useful than ever. They assist in counter trend investments by forecasting accurate price action for a specific currency pair.
Forex is a market of volatilities and inconsistencies. Few decisions can make or mar your trading career. That is why it becomes exceedingly important to make use of a Forex zigzag indicator. Clearing out unnecessary market noise always helps in bringing out the best of your marketing skills.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.