Zig Zag Triad Indicator – Trend Reversal & Continuation Tool
The Zig Zag Triad Indicator is a technical analysis tool designed to identify potential trend reversals and continuation patterns with improved precision. It combines two powerful concepts:
1️⃣ ZigZag Indicator
The ZigZag filters out minor price fluctuations and connects only significant highs and lows. This simplifies the chart and makes the underlying trend structure clearer.
2️⃣ Triad Patterns
Triads are three-bar candlestick reversal patterns that signal potential changes in trend direction.
By merging these two components, the Zig Zag Triad Indicator detects triad patterns on a condensed ZigZag structure, helping traders focus on meaningful price swings instead of market noise.
How the Zig Zag Triad Indicator Works
The indicator highlights potential reversal zones using colored dotted lines on the chart:
- 🔵 Blue Dotted Line → Bearish signal
- 🔴 Red Dotted Line → Bullish signal
Because the signals are generated from filtered price swings, they aim to be more reliable than triad patterns identified directly on raw price charts.
Trading Strategy
Sell Setup
- A blue dotted line appears on the chart.
- This signals a potential bearish reversal.
- Enter a Short (Sell) position at candle close.
- Place a stop loss above the recent swing high.
- Exit when a red dotted line appears (opposite signal).
Buy Setup
- A red dotted line appears on the chart.
- This signals a potential bullish reversal.
- Enter a Long (Buy) position at candle close.
- Place a stop loss below the recent swing low.
- Exit when a blue dotted line appears.
Key Benefits
- Filters out market noise using ZigZag structure
- Identifies reversal points based on triad candlestick patterns
- Provides clear visual entry signals
- Helps detect both trend reversals and continuation setups
- Suitable for swing and intraday traders
- Easy to interpret for beginners and advanced traders
Why Use the Zig Zag Triad Indicator?
Traders benefit by:
- Seeing major price swings more clearly
- Identifying structured reversal zones
- Reducing false signals from minor fluctuations
- Combining it with support/resistance or trend analysis for confirmation
Conclusion
The Zig Zag Triad Indicator enhances traditional triad pattern trading by applying it to a filtered ZigZag price structure. This approach helps traders focus on significant market moves, providing clearer reversal and continuation signals for more structured trading decisions.
