ZigZag: why it repaints, and what it is still useful for

What it measures

ZigZag connects significant turning points and ignores everything in between. A move only counts as a leg if it exceeds a threshold, so small wiggles disappear entirely.

The result is a chart stripped down to structure — the sequence of highs and lows that a human would draw if asked to summarise the price action.

It is a visualisation and a measuring tool, and it is the one indicator on this list that genuinely rewrites its own history.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Track the current extreme in the direction of the active leg.

2. 2

   Extend the leg whenever price makes a new extreme in that direction.

3. 3

   When price reverses by more than the threshold, close the leg at the extreme and start a new one in the other direction.

4. 4

   The threshold can be a percentage of price or a multiple of recent range.

Settings

The threshold is the whole indicator: it decides what counts as a swing. Too small and it draws every wiggle; too large and it collapses months into two lines. Set it against the volatility of the instrument rather than to a fixed percentage.

How to read it

• Use it to read structure: the pattern of higher highs and higher lows, or the failure of one.
• Leg lengths and durations are a quick measure of how the market is behaving — long legs mean trend, short ones mean chop.
• It is the natural input for measuring retracement depth, because it defines what the swing was.
• Every confirmed leg is fixed. Only the last one moves.

Where it misleads

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