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The Zig Zag indicator attempts to plot only the most significant market turns, and is used by many traders to try and find the reason why markets turn. As the last 'leg' in th ezig zag plot can change based on current market action, it has 'perfect 20-20 vision', and you should be wary of this. To calculate the zig zag indicator, plot only those points on a chart where prices reverse by a user-specified amount (e.g. 5% or 8%). Then connect these points with straight lines. The zig zag indicator is virtually useless in day trading. |
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