Sidney S. Alexander developed the numerical framework of the Zig-Zag
indicator as a profit protection mechanism
Later, Arthur Merrill formulated the Zig-Zag indicator as a method to
graphically represent the Alexander Filter.
Merrill writes that he would generally use the 5% and the 10% values
He used this indicator as an integral part of his regular technical
One of the advantages of the Zig-Zag indicator is that it can be used to
draw objective Dow Trend waves and rule-based Elliott Wave lines. This removes
the impressionistic nature of traditional Dow Graphs and
Elliott Charts, which are typically hand-drawn by analysts.
One of the criticisms levelled at the zig-zag indicator is that it repaints,
which means that previously displayed values can change or adjust based on
current variations in the price.
Now, it is undeniable that certain swing turning points do regularly disappear
on repainting. However, the zig-zag indicator does predict every single major
turning point. The question is then essentially one of probability. The zig-zag
indicator correctly predicts every single turning point, it does give false
signals along the way - just like very other indicator.
Moreover, it is advisable to combine the zig-zag indicator with fractals,
which provide another independent way of displaying swing changes in price
which mark the end of trends. Doing so further increases the accuracy of the