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ZigZag

A tool that connects significant swing highs and lows, filtering out moves smaller than a set percentage, used for labelling structure rather than trading.

ZigZag draws straight lines between turning points that exceed a threshold, producing a clean skeleton of swing-highs and swing-lows. It is the standard aid for counting waves, measuring retracements and eyeballing market-structure.

Its defining property is that the last leg is provisional. Until price moves far enough to confirm a new turning point, the most recent line can be redrawn, which means ZigZag repainting is not a bug but the definition of the tool.

This makes it worthless as a signal generator and dangerous in backtests, where using ZigZag points as entries produces spectacular and entirely fictional results. Use it to describe history, never to act in the present.

Related: repainting, swing-high, swing-low, market-structure, backtesting

Educational only, not advice. Spotted an error? Post in Site Feedback.