Double zig-zag indicator for MT4
The zig zag indicator is a simple tool. Yet the information that it offers is quite superior to many other trading indicators. One of the unique things about the zig zag indicator is that unlike technical indicators which are based on a calculation of price, the zig zag indicator plots the highs and lows.
Anyone who has some experience about trading in the markets will know that prices seldom move in a straight vertical or a horizontal direction. Prices tend to rise and fall and move in a somewhat zig zag fashion.
The zig zag indicator is basically a tool that plots these price variations. Depending on the highs and the lows that are formed and the indicator values, the zig zag indicator plots lines from the previous low or high to the next low or high and so on.
Thus, when you apply the zig zag indicator to the charts, you will see a series of lines that tend to connect the highs and the lows. The zig zag indicator somewhat different when it comes to trend lines.
A trend line is basically used to connect two or more corresponding highs or lows in the price. The trend lines depict the trend in the price of the instrument being analyzed. The zig zag indicator on the other hand, connects the highs and the lows as and when they are formed.
zig zag indicator MT4 Default
As you can see from the above chart, the default zig zag indicator simply connects the highs and the lows in price. The indicator or the automatic drawing tool is widely used when it comes to identifying support and resistance levels on the charts.
For example, when price hits a new high on the chart and then retreats, the zig zag indicator plots a high. This potentially indicates a possible resistance level in the chart. Likewise, when the zig zag indicator plots a low based on the low in price and then you see a retracement, this indicates the potential support level on the chart.
Issues with a repainting indicator
For traders who find it difficult to plot the support and resistance levels, the zig zag indicator is a great tool to learn how to draw the support and resistance levels. But given the benefits of the zig zag indicator there are some apparent drawbacks.
The biggest complaints from traders is that the MT4 default zig zag indicator repaints. A repainting indicator is one which tends to correct itself. For traders, this can be quite a disadvantage. Many traders view a repainting indicator as something that cannot be relied upon.
But in its argument, a repainting indicator basically adjusts itself to the developing price action. This means that the indicator adjusts itself in real time as and when new price bars or session are formed.
One of the reasons why traders shun an indicator that repaints is because it can lead to false trading signals. This misconception occurs due to the fact that traders tend to compare all technical indicators the same way.
For example, a moving average indicator is actually a repainting indicator. Depending on how the price of the current session turns out, the moving average tends to move accordingly. You will see the final value of the moving average only after the current session ends. But many traders tend to miss this.
Another factor is that the moving average indicator and many other technical indicators plot their values depending on how the price closes. But when comparing to the zig zag indicator whose sole idea is to plot the highs and lows, you can see why the indicator repaints. The traditional zig zag indicator basically works in real time and shifts depending on how prices evolve.
Thus, when traders use such an indicator which repaints or basically readjusts to price, they find it to be unreliable.
The double zig zag indicator with no repaint
The MT4 customized double zig zag indicator is a product of Point zero. Known as PZ for short, there are various customized indicators that are available for traders to use. Among these, the double zig zag indicator is one such tool that was designed.
The basic idea behind the double zig zag indicator is to ensure that it does not repaint. The question that might come to mind to a sensible trader is how this is possible. After all, the double zig zag indicator is no holy grail. It is in fact built upon the same principles as a regular zig zag indicator.
By tweaking the settings a bit, it is possible to have the MT4 default zig zag indicator to plot the same details but without repainting. The next chart below shows the double zig zag indicator on the price chart.
Double zig zag indicator – MT4
In the above chart, we have used the MT4 traditional zig zag indicator alongside the double zigzag indicator to show the perspective. While the configuration settings are a bit different, you will notice that both the default zig zag indicator and the double zig zag indicator basically show the same details.
What’s different about the double zig zag indicator is that it makes use of two different settings when plotting its values. Therefore, the orange the red dots that you see on the price chart as basically two different configurations of the zig zag indicator.
The double zig zag indicator makes use of a smaller time frame configuration and a larger time frame configuration. This by itself doesn’t offer much information. But on the other hand, using two different time frames gives you the perspective of the short term changes that occur within the longer term configuration.
The next chart below shows the configuration window of the double zig zag indicator. You will need to download this customized indicator from this article. Then move the indicator to the MQL4 folder and then into the indicators section folder.
Refresh your MT4 navigation panel for your MT4 terminal to pick up the indicator. You can then drag and drop the indicator onto the chart. This will present you with the configuration settings for the double zig zag indicator.
Double zig zag indicator configuration
As you can see, the configuration window is not very complex. You can change the values of the zig zag indicator settings and the display is changed accordingly. The configuration settings that you see as basically the depth of the wave of the leg.
By using two zig zag settings, traders are able to view the short term changes as well as the long term changes in price. By now, one might think that the double zig zag indicator is the holy grail indicator.
After all, if you can find an indicator that can pin point with precision the turning points in the price of a chart, it can allow traders to go long or short accordingly. Regardless of how much of a retracement price will make, the ability to go long or short on the price of the instrument can mean that traders can make some significant profits.
However, that is not the case. The double zig zag indicator plots its dots only after price has moved a significant number of pips or ticks away from the previous high or the low that is plotted. By this time, it is possible that there has been a significant retracement already in price.
Thus, even if you went long or short in the direction of the retracement, there is a very good chance that high or low has already been formed. What you will be left with is the fact that the new retracement could start to begin.
In hindsight, the highs and lows plotted by the double zig zag indicator can seem to offer some lucrative trading opportunities. But this is not the case. So the next question that comes to mind is why use this double zig zag indicator at all.
Understanding support and resistance using the double zig zag indicator
The primary purpose of using the double zig zag indicator is to identify potential areas of support and resistance . Due to the fact that the turning points are plotted after price moves or retraces significantly from the low or the high, these areas can provide future reference points of how price can behave. Let’s take a look at the next chart below to illustrate this point.
In the above chart you can see that we have plotted horizontal lines. These lines coincide with the turning points in price. In turn, these lines merely depict the support and resistance levels on the price chart. You can see that after plotting the horizontal lines, price tends to behave as expected.
For example, what started as resistance level turned into support after it was breached, starting from the left side of the chart. Likewise, at times you can see that price tends to respect a support or a resistance level as well.
Besides the above use, the double zig zag indicator is also used in wave counting methods. Traders who trade with Elliott waves, or harmonic trading patterns will find that the double zig zag indicator will point to the right price levels that do not change.
Based on this information, traders can then continue with their harmonic patterns or Elliott wave analysis of the markets.
Using the double zig zag indicator in trading
As illustrated above, the double zig zag method is very efficient when you are using it to analyze the price action of the instrument. At the same time, the indicator can also be used to analyze the markets based on a combination of technical indicators as well.
One distinctive advantage that the double zig zag indicator has over the default zig zag indicator is that the turning points are delayed. This allows price enough room to move around before posting a key reversal in the direction of the trade.
It is this certainty that traders wish to have when using the double zig zag indicator and one that is lacking when using the traditional zig zag indicator. Traders can build upon various trading strategies by combining the double zig zag indicator with either an existing trading system or develop their own unique trading method with the double zig zag indicator.
Double zig zag indicator – Conclusion
In conclusion, the double zig zag indicator is basically a rehashed version of the default zig zag indicator available with the MT4 trading platform. The indicator claims not to repaint the highs and the lows, which are basically the turning points in price.
This is basically achieved by setting the retracement level to a point that following which the indicator can either plot a new pivot high or low or wait until the retracement is complete. For traders who want to trade based on support and resistance levels or those who make use of wave counting methods, the double zig zag indicator offers a better chance of analyzing the markets.
Traders can rely more upon the double zig zag indicator as it combines the efficiency of using a longer term and a short term zig zag indicator settings. The default values can be switched around to make the double zig zag indicator very sensitive or less sensitive to the market volatility .
Because of the delayed reaction, the double zig zag indicator is often used as a better and a more reliable indicator compared to the traditional default zig zag indicator that comes with the MT4 trading platform.
You can also potentially achieve the same results by simply changing the depth of the reversal or the retracement in the price of the instrument being analyzed. But the double zig zag indicator makes it relatively easy to use rather than configure the settings.