What is the use of a zigzag indicator?

<p id="isPasted">The Zig Zag indicator lowers the impact of random price fluctuations and is used to help identify price trends and changes in price trends.</p><ul><li>The Zig Zag indicator lowers the impact of random price fluctuations and is used to identify price trends and changes in price trends.</li><li>The indicator lowers noise levels, highlighting underlying trends higher and lower.</li><li>The Zig Zag indicator works best in strongly trending markets.</li></ul>

<p id="isPasted">The ZigZag indicator is a technical analysis tool used to simplify price action by filtering out minor fluctuations ("market noise") and connecting significant swing highs and lows with straight lines. It is primarily a retrospective tool used for structural analysis rather than a predictive indicator for generating live buy or sell signals.&nbsp;</p><p><strong>Primary Uses in Trading</strong></p><ul><li>Trend Identification: By highlighting major peaks and troughs, the ZigZag makes it easy to visualize trend direction. An uptrend is identified by a series of higher highs and higher lows, while a downtrend shows lower highs and lower lows.</li><li>Support and Resistance: The swing highs and lows plotted by the indicator act as logical areas for potential support and resistance levels.</li><li>Wave Analysis: It is often paired with Elliott Wave Theory to help traders visualize the individual waves in a cycle.</li><li>Chart Pattern Recognition: The indicator clarifies classic formations like Head and Shoulders, Double Tops/Bottoms, and Triangles by cutting through the choppy price data that often obscures these patterns.</li><li>Fibonacci Tools: It helps identify the exact anchor points (maximum highs and minimum lows) needed to draw accurate Fibonacci retracement and extension levels. </li></ul><p><strong>Core Configuration Settings</strong></p><p>Most versions of the indicator, including those in MetaTrader 4/5, use three main parameters:&nbsp;</p><ul><li>Deviation: The minimum percentage or point change required to plot a new swing point; the default is often 5%.</li><li>Depth: The minimum number of candlesticks the indicator examines before establishing a new high or low.</li><li>Backstep: The minimum number of bars between adjacent swing highs and lows to help eliminate false signals. </li></ul><p><strong>Key Limitations</strong></p><ul><li>Lagging Nature: The indicator only confirms a move after the price has already reversed by the specified threshold.</li><li>Repainting: The most recent leg of the ZigZag is not "set in stone" and can disappear or change its position if new price data fails to reach the designated threshold.</li><li>Not Standalone: Because it lacks predictive power, it should always be used alongside other indicators like the Relative Strength Index (RSI) or Moving Averages to confirm trade entries. </li></ul>