ZigZag OrderBlock Retracement – User Guide
ZigZag OrderBlock Retracement – Overview
This guide provides detailed instructions for configuring and using the ZigZag OrderBlock Retracement indicator. This tool is designed to help traders identify market order blocks, retracement levels, and key harmonic patterns based on multiple ZigZag levels, offering insights into potential reversal zones and trend continuations.
1. General Settings
These settings allow you to configure the general behavior of the ZigZag OrderBlock Retracement indicator, including enabling/disabling its visibility and selecting the data source for calculating the ZigZag levels.
- Display Indicator: Toggle the entire indicator display on or off, controlling whether all indicator elements are shown on the chart.
- ZigZag Source: Choose a price source (close, high, low) for the ZigZag calculation. Different price sources can reveal unique trend perspectives.
2. ZigZag Levels Settings
The ZigZag Levels are customizable and allow traders to capture trends across multiple timeframes effectively, each level reflecting different market structures from short-term to long-term trends. The following recommended settings are tailored for various timeframes available on TradingView. Using higher timeframes (e.g., daily or weekly) is ideal for minimizing noise and focusing on stable support/resistance zones formed by historical order block prices. However, the suggested values below can optimize each level for any TradingView timeframe.
Recommended Settings by Timeframe:
Adjust these Length values for each ZigZag Level based on the chosen timeframe:
| Timeframe | Level 1 (Immediate S/R) |
Level 2 (Short-Term) |
Level 3 (Medium-Term) |
Level 4 (Long-Term) |
|---|---|---|---|---|
| M1 | 13 | 21 | 34 | 55 |
| M2 | 14 | 25 | 40 | 60 |
| M3 | 15 | 27 | 45 | 68 |
| M5 | 16 | 30 | 50 | 75 |
| M10 | 20 | 35 | 60 | 90 |
| M15 | 25 | 45 | 75 | 120 |
| M30 | 30 | 60 | 90 | 150 |
| H1 | 50 | 75 | 125 | 200 |
| H4 | 75 | 100 | 175 | 300 |
| D1 | 89 | 144 | 233 | 377 |
| W1 | 100 | 200 | 300 | 500 |
| MN | 144 | 233 | 377 | 610 |
Line Colors and Styles: Customize each level’s color and style (solid, dashed, or dotted) to distinguish between immediate, short-term, medium-term, and long-term levels easily.
3. Order Block Settings
Order blocks mark areas of historical buying or selling interest, where large market orders were placed. These blocks act as support or resistance zones that traders can use to gauge potential price reactions when revisited. Order blocks are particularly effective on higher timeframes, as they reduce noise and focus on significant price movements.
Using Order Blocks Effectively: To maximize their reliability:
- Use historical order blocks on higher timeframes to identify strong support or resistance zones.
- When price re-enters a previously detected order block zone, monitor for potential reversals or consolidations.
- Combine with ZigZag levels to confirm trends or detect potential entry/exit points in alignment with trend direction.
- Enable Order Blocks: Toggle the display of order blocks for each ZigZag level, highlighting areas where major market orders are historically placed.
- Confirm by Close: Confirm an order block only if a bar closes within its bounds, helping to reduce noise and false signals.
- Display Order Block Lines and Labels: Show horizontal lines and labels on each order block for easy identification of these significant zones.
4. Cloud Channels Settings
Cloud channels visually represent high, low, and median price zones based on ZigZag levels, creating a layered cloud effect. These channels help highlight areas of support and resistance, adding visual structure to the chart and aiding in interpreting price behavior around these zones.
- Enable Cloud Channels: Activate the cloud channels to show potential support/resistance zones based on each ZigZag level.
- Cloud Transparency and Color: Customize each cloud’s transparency and color to optimize chart readability and contrast.
5. Harmonic Patterns Settings
Harmonic patterns help detect potential reversal zones by identifying specific price structures based on Fibonacci ratios. Popular patterns include the Gartley, Bat, and Crab, each with unique Fibonacci ratios.
- Enable Harmonic Patterns: Activate harmonic pattern detection to automatically scan for patterns and identify potential reversal points.
- Tolerance Levels: Define the strictness of pattern detection, where lower tolerance levels demand a closer match to Fibonacci ratios for each pattern.
- Pattern Colors: Customize colors for bullish and bearish patterns, making it easier to differentiate between potential upward or downward reversals.
6. Retracement and Pivot Points
Fibonacci retracement levels and pivot points serve as potential support and resistance indicators based on recent ZigZag swings. These levels help identify potential retracement zones where price may react or reverse.
- Enable Retracement Levels: Display Fibonacci retracement levels (e.g., 38.2%, 50%, 61.8%) for each ZigZag swing to highlight key price levels.
- Display Pivot Points: Show pivot points to help identify key zones where price is likely to react based on recent highs and lows.
7. Alert Settings
Alerts allow you to stay informed about key events detected by the indicator. Using alerts effectively can help you monitor important market developments in real time and respond promptly.
- Order Block Alert: Receive alerts when a new Order Block is detected. Important: Note the price levels of these new Order Blocks, as they may later become historical Order Blocks that act as strong support or resistance zones. Monitoring price reactions at these levels is crucial for strategic entries.
- Pattern Formation Alert: Get notified when a harmonic pattern forms, providing insights into potential reversal zones.
- ZigZag Swing Alerts: Set alerts for significant swings detected at each ZigZag level to help you track market direction changes in line with the trend.
Recommended Alert Strategy: Use the Order Block Alert to record and monitor the price levels of newly detected blocks. Over time, these levels may serve as historical support or resistance. This practice ensures you are prepared to act when price revisits these critical zones.
Conclusion and Example Strategy
Goal: To leverage the ZigZag OrderBlock Retracement indicator for identifying high-probability reversal and continuation points, focusing on the interaction between historical Order Blocks and new market signals.
Strategy Steps:
- Monitor Historical Order Blocks: Track the price levels of historical Order Blocks displayed on the chart. These levels often act as strong support or resistance zones. When price re-enters these areas, monitor for reactions such as reversals, consolidations, or trend continuations.
- Use New Order Block Alerts: Record the price levels of newly detected Order Blocks as potential future areas of interest. Over time, these will form a map of high-probability support/resistance levels.
- Combine with ZigZag Levels: Use the ZigZag levels to determine the strength and direction of trends, ensuring your entries align with the broader market context.
- Validate with Price Action: Before entering a position, confirm the price’s reaction at a historical Order Block level. For instance:
- If price tests a historical support block and shows rejection, consider a long position.
- If price approaches a historical resistance block and reverses, it may signal a short opportunity.
Additional Tips:
- Focus on Higher Timeframes: Order Blocks on higher timeframes (e.g., H4, D1, W1) are more reliable for identifying major market moves.
- Combine with Alerts: Use alerts for newly detected Order Blocks and pattern formations to stay aware of evolving market dynamics.
- Risk Management: Use stop-loss orders slightly above/below the nearest Order Block level to manage risk effectively.