definition
The ZigZag is not an indicator in itself, it is more of a filter. The ZigZag filters out unimportant noise in the price chart. The ZigZag in itself has no predictive value and looks back only. The ZigZag is however of added value regarding predictive signals in combination with other tools such as Elliot Wave (wave counts) and Fibonacci retracements (length counter movement after a wave).
signals
As previously described, the ZigZag does not in itself signals. A little further you will still find an effect of the combination ZigZag Fibonacci Retracements.
calculation ZigZag
With the ZigZag filter noise in the price chart. If you set it to 10% then the ZigZag only times when the opposite movement to the current motion is greater than 10%. Is the opposite movement of less than 10% will return not to the ZigZag and continues on his way. See the illustration below.
ZigZag icm Fibonacci Retracements
Fibonacci is good to apply on the waves of the ZigZag. On a large price movement is always followed by a reaction movement and very often ends up on one of the famous Fibonacci Retracements. In the example below, you indicate what Fibonacci Retracement level recovery movements following the sharp declines stop to stop.
