ATR Adaptive ZigZag

ATR Adaptive ZigZag is a chart-overlay indicator for reading market structure across changing volatility conditions. It reduces small price fluctuations into a sequence of meaningful swing legs while preserving a live view of the move that is still developing.

The indicator also places purple markers around unusually stretched market areas. These markers provide context for potential swing exhaustion, but they are not standalone buy or sell signals.

ATR Adaptive ZigZag is most useful for answering three questions:

1. Is the current active swing moving up or down?
2. Which historical swing points have been confirmed?
3. Is price entering an area where the active move may be becoming stretched?

Reading the chart

Solid cyan swing legs

Solid cyan lines connect confirmed swing points. They form the stable historical structure of the chart and make it easier to see sequences such as higher highs, higher lows, lower highs, and lower lows.

A confirmed swing point necessarily appears after price has moved away from the extreme. It should therefore be interpreted as validated structure, not as a trade signal that was available at the exact high or low.

Dashed, faded cyan leg

The dashed cyan line is the active, provisional swing leg. It begins at the last confirmed swing point and follows the candidate extreme of the current move.

This line can extend or change while the swing develops. Treat it as a live map of the current leg rather than finalized historical structure.

Purple circle above a candle

A purple circle above price identifies an upper stretch area in the configured secondary context. It means the advance may deserve closer attention for signs of exhaustion or rejection.

It does not mean that a swing high has been confirmed, nor does it constitute an automatic sell signal.

Purple circle below a candle

A purple circle below price identifies a lower stretch area in the configured secondary context. It means the decline may deserve closer attention for signs of stabilization or reversal.

It does not mean that a swing low has been confirmed, nor does it constitute an automatic buy signal.

Active ZigZag Direction

The status-line output summarizes the direction of the active leg:

• 1 indicates an active upward leg.
• -1 indicates an active downward leg.
• 0 can appear before enough structure is available to establish a direction.

This value describes direction only. It does not express signal strength or forecast the next reversal.

Input settings

Average True Range Length

Controls the volatility horizon used by the swing sensitivity. Shorter values respond more quickly to recent conditions; longer values produce a steadier volatility reference.

Average True Range Smoothing

Selects the smoothing style for the volatility reference. The default RMA provides a balanced response suitable for general swing analysis.

Reversal Threshold (ATR)

Controls how sensitive the ZigZag is to a change in direction:

• Lower values produce more frequent, smaller swing legs.
• Higher values produce fewer, larger swing legs.

This is the primary setting for matching the indicator to the desired swing scale.

Secondary Period (Days)

Sets the multi-day context used by the purple stretch markers:

• Lower values react sooner and may produce more markers.
• Higher values emphasize broader and less frequent conditions.

This setting affects the purple markers, not the scale of the cyan ZigZag legs.

Range Stretch Evidence Length

Controls how much directional evidence is considered by the stretch context. Lower values are more responsive; higher values require a more persistent move.

Range Stretch Band Lookback

Controls the amount of historical context used to judge whether current stretch is unusual. A longer lookback is more stable, while a shorter lookback adapts more quickly to regime changes.

Range Stretch Band Percentile

Controls how selective the purple markers are. Higher percentiles identify more exceptional conditions and generally produce fewer markers; lower percentiles produce more frequent observations.

Default configuration

The indicator currently starts with:

SettingDefaultAverage True Range Length14Average True Range SmoothingRMAReversal Threshold1.5 ATRSecondary Period2 daysRange Stretch Evidence Length3Range Stretch Band Lookback100Range Stretch Band Percentile95

These defaults aim to capture responsive swing structure while keeping the stretch markers selective enough to serve as context rather than constant alerts.

A practical interpretation workflow

1. Use the solid cyan legs to classify the established market structure.
2. Use the dashed leg to identify the direction and extent of the active move.
3. Treat a purple marker as an attention zone, not an entry instruction.
4. Look for confirmation from price behavior, momentum, volume, or another independent tool before acting on a potential reversal.
5. Define risk from current market conditions rather than assuming a marker or swing point will hold.

The strongest reading is usually confluence: established structure, a mature active leg, a relevant purple stretch marker, and independent confirmation all pointing toward the same interpretation.

Important limitations

• ZigZag indicators validate pivots after the fact; they do not predict exact turning points.
• The provisional leg is expected to change as new price extremes form.
• Purple circles identify stretched areas, not guaranteed tops or bottoms.
• Sensitivity varies by instrument and chart timeframe.
• No indicator replaces position sizing, risk management, or independent analysis.