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ZigZag Action Forex Trading Strategy

Amandeep Sonewane | Aug. 29, 2019
ZigZag Action Forex Trading Strategy

You can now download the ZigZag Action Forex Trading Strategy for free on AtoZ Markets indicators gallery.

This trading strategy is based on price action which basically refers to the movement of price as it is plotted on a chart. Most of the technical traders try to read market condition and behavior based on how the price is moving on the chart and would try to predict price movement based on that.   

Knowing that determining trend through swing highs and lows is an effective way of trading the market, we will try to replicate this method, but with training wheels for those who are new to this method. Because determining the swing is quite difficult. Here we are using an often-overlooked indicator, which allows traders to visually determine if the chart is trending or not. Using the ZigZag indicator as a basis for the swing highs and lows. 

Determine that the forex market is forming higher highs and lows, and is therefore on an uptrend, on the pullback, we will look out for bullish candlestick patterns. If the market is forming lower highs and lows and is therefore on a downtrend, then we will look for bearish candlestick patterns. These reversal patterns will be the entry signals. 

Because the ZigZag indicator is more dynamic, the last line usually shifts as price moves along. So, we will not be waiting for it to pinpoint the last high or low as our entry. We will be entering as soon as a reversal candlestick pattern forms. This would usually coincide with a new swing high or low, which is often confirmed a few candles after the entry. 

Indicator:

  • 25 EMA: Green
  • 50 EMA: Brown
  • Zigzag: Depth-5

Timeframe: 5-minute chart and above

Currency pair: any

Session: and if not day trading 

How to trade with ZigZag Action Forex Trading Strategy?

Buy (Long) Trading setup rules

Entry

  • 25 EMA should be above 50 EMA.
  • Price should be forming higher highs and higher lows.
  • Wait for a bullish reversal candlestick pattern to form.
  • At the close of the bullish reversal candlestick pattern, enter a buy market order.

Stop Loss

  • Set the stop loss at the swing low below the entry candle.

Take Profit

  • Set the target take profit at 2x the risk on the stop loss.

Sell (Short) Trading Setup Rules

Entry

  • 25 EMA should be below 50 EMA
  • Price should be forming lower lows and lower highs.
  • Wait for a bearish reversal candlestick pattern to form.
  • At the close of the bearish reversal candlestick pattern, enter a sell market order.

Stop Loss

  • Set the stop loss at the swing high above the entry candle.

Take Profit

  • Set the target take profit at 2x the risk on the stop loss. 

How to download and install an indicator?

In order to install the indicator on your MT4 platform, you need to follow these steps:

  1. Click on “Download Indicator” button located at the top right corner of the screen.
  2. Save the file to your computer.
  3. Extract and move the files into MT4>Indicator folder of the MetaTrader4 software file directory.
  4. Restart your Metatrader platform.
  5. Navigate to “Indicators.”
  6. And select “ZigZag Action Forex Trading Strategy” template to apply it on the chart.

Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.