The Secret Language of the “Zig Zag”

The volatile market can be very choppy, in that the graph of a price chart seems to be all over the place. Some notable examples of the past 2 weeks (main portion of trading day circled in blue):

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Most chart analysis books present charting examples that are much smoother and easier to analyze. But the real world market movement can be anything but “smooth”.  It’s frenetic nature can pose as a difficult riddle to solve for many traders/investors.

However, all that “zig zagging” represents a language, the secret language of the market as it tests resistance and support. Understanding that language is a key to accurately reading market behavior.

So while all the zig zag “chop” is practically universally disliked by traders, it does present opportunities in gaining a deeper understanding of market behavior, which translates to moving up the ladder of trading skill and performance.

 

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5 thoughts on “The Secret Language of the “Zig Zag”

    • That’s the holy grail all traders seek, and what I’ve been working on over the years.

      The zig zags are responses to support and resistance- and the goal is being able to determine a big (S/R) – where an extended move is likely to start, from the small (s/r), which is continued chop.

      Like any language – it looks like gibberish in the beginning but over time, observation, and analysis, it begins to make more sense. My new discoveries/break throughs this year are related to this.

      The big hurdle is unlike modern languages, there is no “dictionary” to refer to for translation- that’s up to the trader to create.

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  1. I remember anyone who used to trade always reading the news and other things, since the media can have such a huge impact on prices. It all seems so interesting, but very time consuming. Hope you’re well.

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    • Thanks! Yes, it can be very time consuming trying to take in all the variables and decide which are important and which can be ignored. One of my first major revelations with trading is that news isn’t a good predictor of stock movement in the short term. One is better off just analyzing price movement and volume.

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