We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
GBP/USD
Bearish
USD/JPY
Mixed
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Notice

DailyFX PLUS Content Now Available Freely to all DailyFX Users

Real Time News
  • What is a doji morning star candlestick? How can you use it in your #tradingstrategy? Find out from @RichardSnowFX here: https://t.co/w7Y4qj2Qkm https://t.co/TUEtdMJZ4I
  • #DidYouKnow traders generally prefer using candlestick charts for day-trading because they offer an enjoyable visual perception of price. Find out how you can utilize it in your trading strategy here: https://t.co/yFn12QgmxO https://t.co/QyHKRJOhDW
  • En español: ¿Qué trayectoria tomará el tipo de cambio del $EURUSD tras los anuncios de política monetaria del Banco Central Europeo y la Reserva Federal? #trading #forex #euro #EURUSD https://t.co/X1nRprTTRU https://t.co/5ZRMRpkro3
  • How can traders avoid #FOMOintrading? Start by implementing a well-heeled plan taking only four hours per week. Get your insight from @JStanleyFX here: https://t.co/vwUShQPc27 https://t.co/eKVhbAGd4C
  • The $NZD has slumped back toward support at four-year lows as sellers retake control of price action after a punchy but brief corrective recovery. Get your market update from @IlyaSpivak here: https://t.co/72JZNVKUy4 https://t.co/e8ygfe6gGf
  • Part of trading is losing, that’s just a fact that everyone must accept straight away, How can #FOMO create hurdles in the process? Find out from @PaulRobinsonFX here: https://t.co/MwChGXI42z https://t.co/slj8Xr0dxH
  • #USDollar May Rise if US #GDP Data, #TradeWar Risks Spook Markets https://www.dailyfx.com/forex/fundamental/forecast/weekly/usd/2019/09/21/US-Dollar-May-Rise-if-US-GDP-Data-Trade-War-Risks-Spook-Markets.html
  • Asia #FX markets will be closely watching for developments in the ongoing China-led RCEP trade negotiations against the backdrop of slower global growth and rising protectionism. Get your market update from @ZabelinDimitri here: https://t.co/HZ8Loqj3Ey https://t.co/g332JcY549
  • What are trading journals? How can you create one and reduce your #FOMOintrading? Find out: https://t.co/0akgWbyJEw https://t.co/Xyy7rxZHip
  • 💷 $GBP British Pound Weekly Technical Outlook My latest take on Sterling price action as #Brexit risk comes back into scope. Commentary on the charts and implied volatility table included. More via @DailyFX ➡️ https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/09/21/gbp-to-usd-price-analysis-british-pound-eyes-rise-in-brexit-risk.html https://t.co/Hd6LAurfqG
Elliott Wave Patterns: What is a Zigzag?

Elliott Wave Patterns: What is a Zigzag?

2018-03-30 16:11:00
Jeremy Wagner, CEWA-M, Senior Strategist
Share:

Talking Points

-Zigzags appear in the construction of many of the Elliott Wave patterns

-Zigzags subdivide as an A-B-C (5-3-5) sequence

-Many times, wave C can be estimated using common ratios and channeling

In Elliott Wave theory, a zigzag is a pattern consisting of 3 waves labeled A-B-C. Most of the time, the pattern will print in the direction against the main trend and is typically a counter trend formation. Zigzags are typically found in the 2nd wave of a 5 wave impulse and have a part in the formation of Elliott wave triangles. Many times, zigzags appear somewhere within a complex correction. There are even a few instances where a zigzag will print in the direction of the larger trend. As a result, the zigzag pattern is an integral price pattern which can be found in several locations within the eight wave Elliott Wave sequence.

Zigzags can print in either the bullish or bearish direction.

Idealized Zigzag

Elliott Wave Patterns: What is a Zigzag?

[Image 1]

Zigzags look like a lightning bolt on the chart. There are 2 rules for zigzags:

  1. The sub waves of an A-B-C zigzag appear as 5-3-5
  2. Wave B of the zigzag cannot retrace 100% of Wave A – most of the time wave B retraces 38-78% of wave A
Elliott Wave Patterns: What is a Zigzag?

[Image 2]

The 3 waves of the zigzag (A-B-C) subdivide as a 5-3-5 meaning the ‘A’ leg has 5 sub waves in it, the ‘B’ leg has 3 sub waves in it, and the ‘C’ leg has 5 sub waves in it. As a result of the ‘A’ and ‘C’ legs both containing 5 sub waves each, the impact of the whole zigzag structure is to be a deep retracement and recover a lot of price from the previous trend.

Also, the zigzag was designed to make progress against the trend. Therefore, wave B of a zigzag can be any 3 wave pattern (including another zigzag), but wave B cannot retrace 100% of wave A. A retracement of 99% is acceptable, though unlikely and progress needs to be made.

There are a couple of reasons why the 2nd wave of a 5 wave impulse is typically made up of a zigzag. The first reason is because the 1st wave is the start of a new trend, the 2nd wave can be latent desires for the old trend to continue. As a result, the 2nd wave acts as a shake out for the new trend traders and the old trend traders as a deep retracement is typically obtained. Second waves typically retrace 50-78.6% of the first wave.

Within the zigzag pattern, many times you can estimate the termination zone of wave C. In Elliott Wave Theory, alternating waves tend to be related in distance. Therefore, once we believe wave C has started, we can estimate the length of C based on the length of A. Wave C typically has an equal measurement to wave A, or a .618 or 1.618 multiple of wave A.

In the example below, we can see where wave ‘C’ was equal in length to wave ‘A’ at the black horizontal line labeled “100% 7488.2.”

Elliott Wave Zigzag That is an Equal Wave

Equal Wave Zigzag [Image 3]

Created using IG charts

Additionally, it is common for the A-B-C zigzag to create a price channel. So we can use the price channel as a means to estimate the termination point of C and the zigzag pattern.

These price approximations become powerful when there are other wave relationships showing up in the same price zone as the estimated termination point.

Interested in learning more about zigzags, how to identify and trade them? Register and watch this hour long webinar recording solely on the topic of zigzags.

---Written by Jeremy Wagner, CEWA-M

DailyFX Education

Having a method to time trade entries is important. Managing your risk may be even more important. Learn how the better performing traders manage their risk by reading our Traits of Successful Traders research. [Free registration required.]

Follow me on twitter at @JWagnerFXTrader .

Read More: 3 Elliott Wave Flat Patterns to Know and Understand

The full suite of Elliott Wave resources can be found at the links below [registration required]:

Beginner and Advanced Elliott Wave trading guides

For more in depth study on Elliott wave patterns, we have these one hour webinar recordings:

Elliott Wave Impulse Patterns

Elliott Wave Zigzag Patterns

Elliott Wave Flat Patterns

Elliott Wave Triangle Patterns

Elliott Wave Diagonal Patterns

Starting Your Elliott Wave Counting

provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.