Zigzag Indicator Guide for MT4/MT5

The zigzag is a swing indicator that draws winding lines on the MT4 chart. On the one hand, this MetaTrader indicator provides traders with a smoother trend direction. Because it filters the noise generated by minor price fluctuations. In fact, this swing forex system involves swing lows and highs as meaningful price shifts in order to determine major trends. Also, it is a winding tool that can identify resistance and support levels. That’s why swing forex traders employ the MT5 zigzag indicator in order to predict trend reversals or the movement continuation. However, the predictive power of the zigzag strategy is very sensitive to the settings of the indicator on the Tradingview platform. Thus, we will comprehend how to develop a swing trading system based on Zigzag lines and using the most suitable settings. Besides, we will locate popular pattern formations on the trading chart using zigzags.

What is zigzag indicator ?

The zigzag strategy makes use of a winding line on MetaTrader platforms. This trading strategy is valuable for two reasons. First, it neglects price noise that would be perturbative to chart analysis. In fact, that helps Forex traders to stay in the trend direction by filtering minor price reactions. Thus, assists them to keep their winning positions on their trading charts. Second, it suggests where the trend could mature and reverse. In fact, trends get exhausted over time. Hence, a zigzag strategy provides chartists with potential reversal chances.

ZigZag settings

The ZigZag tool has three principal settings. Firstly, there is Depth. To explain, it represents the minimal number of candles with no afterward top or bottom deviation from the candle. Secondly, there’s Deviation. Also known as the percentage deviation or percentage change. To clarify, it represents the number of pips after the formation of previous tops and bottoms. In other words, the move reverses if these pips are exceeded. Thirdly, there is Backstep. That is to say, the minimal number of candles between swing lows and swing highs. Hence, the zigzag strategy is so sensitive to depth and deviation settings.

How to read it ?

The zigzag line reveals the major market trend as a trendline. It’s so easy to read the Zigzag indicator on Metatrader charts. Because zigzags are simply plotted as trendlines. That is to say, it simply reveals in which direction the Forex market is trending. Consequently, an upward zigzag suggests a booming market. Conversely, a downward zigzag suggests falling prices. In short, Zigzags assist you in which direction you have better trade.

How to use the zigzag indicator ?

Skilled Forex chartists use the MT5 zigzag indicator along with trendlines on Tradingview charts. To explain, this forex trading system enables them to forecast money management targets. That is to say, stop-loss and take-profit orders. In short, these are the main uses of zigzags:

For a long trade, you can employ past zigzag Tops as take-profit targets. Further, zigzag bottoms are like previous stop-loss ones.
For a short trade, you can employ the previous zigzag Top as a stop-loss target. Also, past zigzag bottom as a take-profit one.
Zigzag highs and lows can be connected to draw trendlines. Thus, to detect price channels.
These drawings would be considered as support and resistance levels.

Let’s consider the EURAUD currency pair as an example:

First, we linked higher highs to project an upper line. To explain, this line will be considered as a resisting line.
Second, we linked higher highs to project a lower line. To clarify, this line will be considered as a supporting line.
Consequently, we have projected a price channel.
Third, we place a short order at the top of the price channel. That is to say, at the forecasted resisting line.
Fourth, we set a take-profit level at the bottom of the price channel. That is to say, at the forecasted supporting line.
Finally, we set a stop-loss order at the last swing point generated by the MT4 Zigzag indicator.

Download Zigzag indicator for MT4

The MT4 zigzag indicator identifies tops and bottoms in Metatrader 4 chart. In fact, it draws zigzags that link important market tops and bottoms in Metatrader 4. To explain, this technical tool identifies Swing points. That is to say, swing highs during an upside movement. Contrarily, swing lows during a downward move. Consequently, this provides traders with an easier and smoother examination of the trend. In conclusion, the Zigzag indicator for MT4 is based on:

Higher Highs and Higher Lows in an upward move.
Lower Lows and Higher Lows in a downside movement.

Download Zigzag indicator for MT5

The MT5 zigzag Indicator pinpoints important formations by linking swing lows and swing highs of the price activity. In fact, lows and highs are connected with a line tracing the action of the price. Consequently, the winding line may look like a pattern on the MetaTrader 5 platform. In conclusion, the Zigzag indicator for MT5 assists traders to forecast pattern formations.

Conclusion

Zigzag is an effective swing indicator for trend trading by identifying extreme upper and lower points for swing forex traders. Thus, a zigzag strategy may not be suited for ranging FX markets. Moreover, connections between zigzag tops and bottoms are very useful in detecting trends and possible reversal opportunities on MetaTrader charts. As a result, Patterns may appear along with support and resistance levels.

Key Takeaways

Let us recap the MT4 zigzag indicator for the MetaTrader terminal. This technical tool connects significant swing points to:

Identify famous pattern formations on the MT5 chart, which may be invisible to some chartists with the naked eye.
Highlight significant trends in a smooth mode on the Tadingview platform.
Verify potential price reversals in MT4 charts along with support and resistance detection via extremities of winding zigzags.

November 22, 2023