ZigZag

What it is

ZigZag filters out price movements smaller than a chosen percentage and connects the surviving swing highs and lows with straight lines. The result is a clean skeleton of the market's meaningful swings, with all the minor noise erased.

How it is calculated

The indicator tracks the latest extreme and only commits a pivot once price has reversed against it by at least the deviation percentage, with the depth setting requiring a minimum number of bars between pivots. Until that reversal threshold is met, the current leg keeps extending to each new extreme - which is why the most recent segment is provisional by construction.

How to read it

On the price chart, swing_highs and swing_lows mark the confirmed pivot points, and connections draws the straight legs between them. Read the structure, not the individual bars: a sequence of higher swing_lows and higher swing_highs is an uptrend by definition; lower highs and lower lows a downtrend. The pivots double as natural support/resistance references and as anchors for measuring swing sizes, retracements, and chart or wave patterns. Treat the final leg as unconfirmed - it will keep redrawing while price extends.

What to look for

• Trend filterContext

  A run of higher swing_lows and higher swing_highs defines an uptrend structure; lower highs and lower lows define a downtrend - the cleanest way to read market structure.

• Turning patternContext

  A confirmed pivot that breaks the prevailing sequence (e.g. the first lower swing_high after a series of higher ones) is an early structural warning of a trend change.

• ConfirmationContext

  Confirmed pivots are reference anchors for retracement measurements, pattern outlines and wave counts - analysis performed in hindsight, on settled structure.

When to use it

ZigZag is an ANALYSIS overlay, not a signal generator: use it on any market and timeframe to study swing structure, identify support/resistance pivots, measure retracements, and provide context for pattern or Elliott-style work in backtesting and chart review. Do not use it for live entries - by the time a pivot is confirmed, price has already reversed by the full deviation percentage, and the last leg is still mutable.

Works well with

Settings explained

deviation

Default 5.0 (percent). The minimum reversal required to confirm a new pivot. Smaller values keep more minor swings (a busier zigzag); larger values keep only major swings and confirm them later.

depth

Default 3. The minimum number of bars between pivots. Raising it suppresses rapid-fire pivots in volatile stretches and enforces a minimum swing duration.

Limitations and common mistakes

• ZigZag REPAINTS: the last leg keeps redrawing as new extremes form, and a pivot that looks confirmed can vanish if price pushes past it before reversing enough. Never trade the most recent segment as if it were settled.
• Backtests that read ZigZag values as-of-now overstate performance badly, because historical charts show only the final, hindsight-perfect version of every swing.
• Pivot confirmation is inherently late - each pivot is only known after price has already moved the full deviation away from it.
• The output is entirely a function of the deviation/depth choice; two analysts with different settings see different "structures" on the same chart.

References

• Origin: Charting convention—no single originator.

This page explains how an indicator is calculated and read. It describes past data, not what price will do next, and it is not a recommendation to trade. Read the disclaimers.

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