ZigZag Indicator
The ZigZag indicator draws straight lines between significant swing highs and lows, ignoring any move smaller than a set percentage (often 5%). It cleans up noise to show market structure, but it has no predictive power because its last line can change.
Price charts are noisy: lots of small wiggles hide the bigger swings that matter. The ZigZag indicator strips them away, connecting only the meaningful turning points. It is popular for spotting swing structure, counting Elliott waves and drawing Fibonacci levels. But it has a big catch — the most recent line keeps redrawing until a new swing is confirmed. This entry explains how it works and how to use it safely.
- Category
- Indicators and Tools
- Reading time
- 4 min
- Also called
- ZigZag, Zig Zag indicator, ZigZag overlay
- Updated
ZigZag in plain words
ZigZag is less an indicator than a filter that hides smaller price moves: set it to 10 and every move under 10% is ignored.1
It is drawn as a line over the price chart, and 5% is the traditional threshold, though you can change it.1
Because the lines are drawn with hindsight, ZigZag has no predictive power on its own.1
How ZigZag is drawn, step by step
Choose a threshold
For example 5% or 10%.
Start from a swing point
The last confirmed high or low.
Wait for a reversal
Price must move against the swing by at least the threshold.
Draw the line
Connect the previous swing point to the new extreme.
Keep updating
The last line extends until a new reversal is confirmed.
Read the structure
Higher highs and lows, or lower ones. See Market Structure.
Worked examples
Example 1 — Filtering noise
Dip filtered outZigZag at 5%. A stock rises from $100 to $120, dips to $116, then climbs to $130.
| Dip size | ($120 − $116) ÷ $120 ≈ 3.3% |
| ZigZag result | One line $100 → $130 |
Moves smaller than the threshold are left off the ZigZag line.1
Example 2 — A confirmed swing
Swing high confirmedSame 5% setting. From $130 the stock falls to $122.
| Drop | ($130 − $122) ÷ $130 ≈ 6.2% |
| ZigZag result | New swing high at $130 |
Only moves larger than the threshold appear on the line, so a drop above 5% marks $130 as a swing high.1
Example 3 — The redraw problem
Last leg repaintsThe last ZigZag leg points up to $140. Price then rises to $145 without a 5% pullback.
| Last leg before | Ends at $140 |
| Last leg after | Redrawn to $145 |
Because ZigZag uses hindsight, its latest leg changes and cannot be traded as a signal.1
ZigZag vs moving average
| Aspect | ZigZag | Moving average |
|---|---|---|
| What it shows | Swing highs and lows | Smoothed average price |
| Changes past values | Last leg can redraw | No |
| Lag | Confirmed only after a reversal | Lags price |
| Main use | Structure and patterns | Trend direction. See Moving Average |
How traders use ZigZag
Elliott Wave counts
Clear swings make waves easier to label.1 See Elliott Wave Theory.
Fibonacci levels
Anchor retracements on clean swing points. See Fibonacci Retracement and Extension.
Chart patterns
Spot double tops, triangles and more. See Head and Shoulders.
Filtering indicators
It can also smooth indicators such as RSI.1
Advantages and disadvantages
Advantages
- Removes noise to show real swings.
- Simple to set up and read.
- Great for structure, waves and Fibonacci work.
Disadvantages
- The last leg repaints.
- No predictive power on its own.
- Results depend heavily on the threshold.
Going deeper
Read as far as you need. Each level builds on the one before it.
Choosing the threshold
Beginner
A small percentage shows many swings; a large one shows only major turns. Match it to the asset's volatility and your time frame. See Volatility.
Overlays and indicators
Intermediate
Backtesting trap
Advanced
Because the latest leg redraws, a backtest that uses final ZigZag points can look perfect but be impossible to trade live. Only use confirmed swings. See Look-Ahead Bias.
Common mistakes
Trading the last leg
It can change completely.
Wrong threshold
Too small is noisy, too large misses swings.
Using it alone
It describes, it does not predict.
Backtesting with hindsight
Results will be unrealistic.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- ZigZag connects swing highs and lows above a set threshold.
- 5% is the traditional setting.
- It filters noise to show structure.
- Its last leg redraws, so it has no predictive power.
- Use it for Elliott Wave, Fibonacci and patterns.
Frequently asked questions
Does the ZigZag indicator repaint?
What is the best ZigZag setting?
Is ZigZag good for beginners?
Further learning
- Elliott Wave Theory
The classic use for ZigZag.
- Fibonacci Retracement and Extension
Levels drawn from clean swings.
- Market Structure
Reading highs and lows.
- Look-Ahead Bias
Why redrawing tools mislead.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. ZigZag (opens in a new tab) Checked .
- StockCharts ChartSchool. Introduction to Technical Indicators and Oscillators (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.