Zig zag
Filters out price moves smaller than a set threshold and connects only the significant swing highs and lows, making the larger trend structure easier to see. It redraws as new data arrives, so it isn't a real-time signal.
What the numbers mean
The single setting is the reversal threshold: how far price must move against the current swing before a new leg is drawn. At 5%, moves smaller than five percent are ignored entirely; raising it shows only the largest swings, lowering it fills the chart with minor ones.
- 5% — the common default; moves smaller than five percent are ignored entirely
- 3% — shows more, smaller swings; useful intraday
- 10%+ — shows only major structural turns, for long-term analysis
- Some platforms set the threshold in ATRs instead of percent, which adapts to volatility
How it is used
Used to strip a chart back to its structural highs and lows — for counting waves, measuring how far typical retracements run, and framing patterns such as head and shoulders.
- Framing chart patterns — the legs are what make a head and shoulders countable
- Measuring how deep typical retracements run in a given security
- Anchoring Fibonacci retracements to a clean swing high and low
How it relates to everything else
Zig Zag is a drawing aid rather than a signal tool, and it is the natural companion to the chart-shape patterns: necklines, cup rims and wedge boundaries are all drawn between the swing points it marks. Because its final leg repaints, it can never be used live — it describes structure that has already completed.
- Feeds naturally into Fibonacci retracements and pattern drawing
- The threshold decides which patterns are even visible — raise it and small shapes disappear
- Repaints, so a back-test built on it will look far better than reality
What to watch for
It repaints. The last leg is provisional and will be redrawn if price reverses, so it can never be used for live signals — only for studying completed structure.