Zigzag Trading Strategy for Gold Daytraders
Zigzag is one of the most powerful indicators which helps the trader to identify recent swing high and swing low of any asset. The professional gold trader uses zigzag indicator along with the CCI indicator to take high-quality trades in the market.
The most recent swing high and swing low acts as strong support and resistance level for the day traders. This strategy is more like breakout trading strategy since trade is taken with the successful breakout of a recent high or low depending on the trend. To filter the noise and false signal professional day traders also use CCI indicator while trading this strategy
Let’s see an example zigzag gold trading strategy for gold.
Figure: Trading the gold with zigzag and CCI indicator
The zigzag indicator draws red line adjacent to the price which helps the trader to identify the most recent swing high and swing low. In the above figure most recent swing high is broken with the formation new higher high. This breakout of the price to form new higher high is the first condition of this trading strategy.
The new higher high is also taken out by buyers to form another peak in the price. This is the time when the CCI indicator comes into action. A value greater than 100 in the CCI indicator means overbought condition and a value which less than -100 means oversold condition. The price tends to retrace back to the new higher which acts as the strong support level. If the value of CCI is below the -100 line than traders went long in the retracement of the price.
The stop loss is placed just below the recent swing low of the asset. Take profit area is determined by the professional day traders by using the next key resistance level of the gold market. The trader must use proper risk reward ratio before taking the trade with this strategy in order to avoid unexpected losses.