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The Zigzag (Retrace) indicator automatically calculates retracements and shows these numbers on the dotted lines connecting the highs or lows. The chart below shows the S&P 500 with the Zigzag (Retrace) indicator set at 10%. This means only moves of 10% or more are shown with the zigzag (pink). Price moves less than 10% are ignored. The zigzag uses the highs and lows with candlestick and bar charts, but closing prices with a close only chart. A dotted line connecting two highs shows the retracement of the prior decline. A dotted line connecting two lows shows the retracement of the prior advance.
Click this image for a live chart.
On the example above, we can see that the advance from November to April (1159.66 to 1422.38) was 1.968 times the November decline (1292.66 to 1158.66). In other words, it was almost double the November decline. Notice how the dotted line connects the two highs. The most recent decline from April to June (1422.38 to 1266.74) retraced .59 (59%) of the prior advance (1158.66 to 1422.38). The dotted line connects the two lows. Also notice that the November decline retraced .615 (61.5%) of the October advance. The lower chart shows the Fibonacci Retracements Tool for reference.
