The simplest tool to identify market trends is ZigZag Technical Indicator. In this article, I will show you how to use ZigZag indicator. At the same time, I develop some IQ Option trading strategies in accordance with this type of indicator.
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What is ZigZag indicator?
Zig Zag is a technical indicator used to filter price movements in the market. The principle of using ZigZag is quite simple. It will filter the noise signal from the price. After that, you only see the simple wave structure on the market in the true sense of the wavelength including wave crest and trough.
How does ZigZag indicator work?
ZigZag is an indicator used to identify the main trend of the market. Based on the small waves created by Zig Zag, you will know exactly what the market trend is.
(1) The next top is higher than the previous ones + the next bottom is higher than the previous ones => Upward trend (ZigZag is moving up).
(2) The next bottom is lower than the previous ones + the next top is lower than the previous ones => Downward trend (Zig Zag is moving down)
Set up Zig Zag indicator in IQ Option
To set up Zig Zag indicator. (1) Click the indicator box => (2) Tab Trend => (3) Select Zig Zag.
You can customize the standard deviation to suit your strategy. The default of the platform is 1. Adjust the increasing line to green and the decreasing line to red as shown in the picture for easy observation.
In IQ Option, ZigZag will form when prices have trend fluctuations. It means that the price moves before ZigZag is formed.
How to trade with ZigZag indicator in IQ Option
The most effective IQ Option trading formula is to Identify main trends > Find signals to open options.
Then, you will use Zig Zag indicator to read price trends. And combine it with one more type of indicator to find entry points. Especially, the method to open a trade is always Uptrend = HIGHER and Downtrend = LOWER.
The meaning of icons on the picture:
Lamp icon is a signal to open a trade (option).
The green arrow icon is to open a Higher option when the signal has just ended.
The red arrow icon is to open a Lower option.
Method 1: ZigZag indicator works with SMA30
Zig Zag plays a key role in identifying the price’s main trend and SMA30 indicator acts as an entry signal.
Requirements: Japanese 5-minute candlestick pattern + ZigZag indicator and SMA30 indicator. The expiration time is 15 minutes or more.
Trading method:
HIGHER = ZigZag increases + The price goes down and hits SMA30 from the top.
Explanation: ZigZag increases => the price is rising. The price will be above SMA30. When the price touches SMA30, the probability of an uptrend is very high => open a HIGHER option.
LOWER = Zig Zag decreases + The price moves up and hits SMA30 from the bottom.
Method 2: ZigZag works with Support and resistance zones
Usually, ZigZag runs after the price. This means that Zig Zag can only be drawn when the price has temporary reversal fluctuations.
But at the signal of a reversal (at the support or resistance level), ZigZag appears. This is considered a signal to open an option.
For instance, the green ZigZag appears when the market creates a Doji candlestick in the resistance zone. This is a temporary trend reversal signal. You can open a LOWER option here.
Summary
ZigZag is a reliable trend confirmation indicator. You need to combine a number of other indicators to give safe trading signals.
In IQ Option, trading with trends is usually a long-time trade to avoid temporary price movements.
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